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Esparza v. Regent Insurance Co.

United States District Court, D. Kansas

June 6, 2018

STEPHANIE L. ESPARZA, Plaintiff,
v.
REGENT INSURANCE CO., Intervenor.

          MEMORANDUM AND ORDER

          J. THOMAS MARTEN, JUDGE

         Plaintiff Stephanie Esparza was injured in an auto accident while driving a rental car when she was in Wichita, Kansas, for job training. The original defendant, Ruben D. Baker, settled with Esparza under his insurance policy. Regent Insurance Company (“Regent”) intervened and declined to substitute its funds because it concluded that Esparza was not an insured entitled to underinsured motorist coverage under Regent's policy with Esparza's employer. This matter is before the court on the parties' cross motions for summary judgment on the issue of coverage (Dkts. 24, 27). Both parties seek a declaratory judgment in her/its favor. For the reasons provided below, the court declares that Esparza is an insured under Regent's insurance policy and is entitled to UIM coverage.

         I. Stipulated and Uncontroverted Facts [1]

         Regent issued a commercial auto policy to K.C. Bell, Inc. (“K.C. Bell”), No. CBA1228034, for the period of April 1, 2016, to April 1, 2017, which was a renewal of a prior policy. The policy provides uninsured (“UM”) and underinsured motorist (“UIM”) coverage with limits of $1, 000, 000 for specific vehicles identified and scheduled in the policy.

         On June 20, 2016, Esparza, a California resident, was in Wichita to complete 30 days of training as a manager for a new Freddy's Frozen Custard franchise in San Diego, California, which is owned by K.C. Bell, Esparza's employer. Esparza did not have a credit card and therefore, a K.C. Bell employee, Tyler Hoover, rented a car for her use while she was training in Wichita. The rental was a 2016 Ford Mustang (the “rental car”) obtained from Budget Car and Truck Rental of Wichita, Kansas (“Budget”). K.C. Bell paid Budget for the rental car as a covered expense benefit to Esparza, however, she was not listed as a driver on the rental car.

         On the last day of her training, Esparza was driving the rental car when it was struck by Baker's car. Baker carried an insurance policy with Farmers Insurance Company (“Farmers”) containing a liability limit of $30, 000. Farmers tendered its policy limit of $30, 000 to Esparza.

         Plaintiff proceeded pursuant to K.S.A 40-284(f) to give Regent the opportunity to substitute payment. Regent elected not to substitute its payment thereby allowing plaintiff to accept Farmers' policy limit and preserve her UIM claim against Regent.

         Although plaintiff's accident occurred within the commercial policy's applicable period, Regent denied plaintiff's UIM claim based on provisions contained within the policy.

         Plaintiff filed a workers' compensation claim pursuant to California law and some of her losses will be recovered in that proceeding. Plaintiff sustained personal injury damages because of the collision, however, the exact amount of damages plaintiff is entitled to recover is currently disputed and will be determined at a later date pending the outcome of a determination by the Court on the coverage issue.

         Regent claims that Esparza was not an insured under the policy; Esparza disagrees and seeks a declaratory judgment, pursuant to 28 U.S.C. §§ 2201, 2202, that the UIM provision extends to her as an insured. The parties agree that Regent's policy was issued in Kansas and the issue of coverage under the policy for UIM benefits is governed by Kansas law.[2]

         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 the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A fact is “material” when it is essential to the claim, and the issues of fact are “genuine” if the proffered evidence permits a reasonable jury to decide the issue in either party's favor. Haynes v. Level 3 Communs., 456 F.3d 1215, 1219 (10th Cir. 2006). The movant bears the initial burden of proof and must show the lack of evidence on an essential element of the claim. Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10th Cir. 2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). The nonmovant must then bring forth specific facts showing a genuine issue for trial. Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). The court views all evidence and reasonable inferences in the light most favorable to the nonmoving party. LifeWise Master Funding v. Telebank, 374 F.3d 917, 927 (10th Cir. 2004).

         III. Discussion

         Regent denied payment under the policy because Esparza was in a rental car, which, according to Regent, is not a covered auto licensed or principally garaged in Kansas. Regent refers to Item Two, Schedule of Coverages and Covered Autos, and asserts that UM and UIM coverage is limited to Category 6 Covered Autos, which does not include hired or rented autos. Regent contends that K.S.A. 40-284 does not mandate UIM coverage for rented autos, nor under the facts of this case.

         a. The Policy

         On page one, Regent's policy states,

Each of these coverages will apply only to those autos shown as covered autos. Autos are shown as covered autos for a particular coverage by the entry of one or more of the symbols from the covered auto section of the business ...

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