Opinion
No. 109,011.
2013-08-23
Sharon ROULLINS and LaVone A. Daily, Appellees, v. AMERICAN RELIABLE INSURANCE CO., Appellant.
Appeal from Wyandotte District Court; Constance M. Alvey, Judge. Suzanne R. Bruss, of Franke Schultz & Mullen, P.C., of Kansas City, Missouri, for appellant. Donald T. Taylor, of Robb, Taylor & O'Connor, of Kansas City, for appellees.
Appeal from Wyandotte District Court; Constance M. Alvey, Judge.
Suzanne R. Bruss, of Franke Schultz & Mullen, P.C., of Kansas City, Missouri, for appellant. Donald T. Taylor, of Robb, Taylor & O'Connor, of Kansas City, for appellees.
Before, MALONE, C.J., BRUNS and SCHROEDER, JJ.
MEMORANDUM OPINION
PER CURIAM.
LaVone A. Daily, the mortgagee, sold her house to Sharon Roullins in 1994 on contract for deed and continued to provide the homeowner's insurance through American Reliable Insurance Co. (Reliable) at the time of the loss. A total loss occurred to the house on March 31, 2010. Reliable claimed the house was vacant and refused coverage. The district court granted summary judgment to Roullins and Daily against Reliable. We reverse the district court's grant of summary judgment to Roullins and Daily, along with the order granting them attorney fees, costs, and prejudgment interest. We remand to the district court to grant summary judgment to Reliable under the occupancy endorsement and vandalism or malicious mischief exclusion of the policy and for further proceedings consistent with this decision.
Facts
Roullins bought the house from Daily in 1994 and lived there with her three daughters until June 2006. Daily bought and paid for insurance on the house with Roullins as the insured and Daily reflected as mortgagee. The insurance policy provided coverage for personal property damage by fire up to $12,000 and provided dwelling coverage for fire damage up to $30,000.
After Roullins' oldest daughter moved to Lawrence, Roullins and her other daughters also moved to Lawrence in June 2006. Roullins left most of the household items in the house because she could not find help to move them. The household items included: living room set, refrigerator, stove, freezer, air-conditioner, TV, two beds, exercise equipment, washer/dryer, as well as smaller items including clothing and toys. Roullins returned to the house on a regular basis to pick up and leave items.
After June 2006, Roullins never lived or stayed in the house and only made a few payments to Daily. Daily considered foreclosure, but changed her mind. Daily thought Roullins would eventually pay off the contract for deed. Roullins thought Daily had given the house to her.
Daily denies she knew Roullins was not living in the house, although she admitted to receiving payments from Roullins with a Lawrence return address. Roullins' parents lived across the street and kept watch over the house. The utilities to the house were turned off and the roof leaked. Someone had been in the house at least two times without authority. A fire was started in the house on March 31, 2010, by juveniles, causing a complete loss of the house.
The district court concluded there were no genuine issues of material fact in dispute and granted summary judgment in favor of Roullins and Daily. The district court ruled the term “vacant” in the insurance policy was not ambiguous, though it was susceptible to more than one construction and, therefore, the construction most favorable to the insured prevails. Relying on Speth v. State Farm Fire & Casualty Co., 272 Kan. 751, 35 P.3d 860 (2001), and the cases analyzed therein, the district court found the term “vacant” in the policy meant unoccupied and unfurnished. The district court concluded Roullins' house was not vacant at the time of the fire because “it was not deprived of all contents and had basic amenities for human habitation.” The district court awarded the plaintiffs $30,000 for the dwelling loss and $12,000 for the personal property, and assessed attorney fees, costs, and prejudgment interest against Reliable.
Reliable timely appeals.
Analysis
Standard of Review
All material facts are agreed upon between the parties except Daily's knowledge of the house being vacant. Where there is no factual dispute, the panel reviews an order granting summary judgment de novo. David v. Hett, 293 Kan. 679, 682, 270 P.3d 1102 (2011). This appeal also concerns interpretation of the certificate of insurance. Insurance contract interpretation is a question of law and is also reviewed de novo. Iron Horse Auto, Inc. v. Lititz Mut. Ins., 283 Kan. 834, 838–39, 156 P.3d 1221 (2007); Partridge v. Mong, 45 Kan.App.2d 766, 768–69, 252 P.3d 640 (2011). The burden of proving an exclusionary provision applies to preclude coverage falls on the insurer. Speth, 272 Kan. at 753.
Did the District Court Err in Granting Summary Judgment in Roullins' and Daily's Favor?
Reliable contends the occupancy endorsement and the vandalism or malicious mischief exclusion in its policy excluded coverage for damage caused by the fire as the house had been vacant for more than 60 days prior to the loss. Reliable asserts the uncontroverted facts show no one had lived in the insured property for 3 1/2 years prior to the loss and the house was being used for storage. Reliable argues the house was clearly vacant under the unambiguous terms of its policy.
The occupancy endorsement states in relevant part; “it will be a Condition of this policy that the Company shall not be liable for any loss or losses that occur, while the described dwelling, whether it is intended for occupancy or not, is vacant beyond a sixty (60) day period of time.”
The vandalism or malicious mischief exclusion states:
“This peril does not include loss:
....
“b. To property on the Described Location, and any ensuing loss caused by any intentional and wrongful act committed in the course of the vandalism or malicious mischief, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant.”
Kansas Cases
The parties acknowledge Speth and its definition of “vacant.” See Speth, 272 Kan. at 751. In Speth, the homeowner insured her home with State Farm. The policy excluded coverage for vandalism when a house had been “vacant” for more than 30 consecutive days. The homeowner died and Speth was appointed executor. Four months after the homeowner's death, the home was vandalized. State Farm denied coverage on the grounds the house had been vacant for more than 30 consecutive days. The case was submitted to the district court on cross-motions for summary judgment with the following stipulated facts.
“At the time of the vandalism: (1) an alarm system was in place and operable, but had been turned off so that the home could be shown by realtors, (2) the home was empty of all contents except a stove and a refrigerator for more than 30 consecutive days, and (3) the home was serviced by water, gas, and electric utilities.” 272 Kan. at 752.
The district court granted summary judgment to State Farm and Speth appealed. The Kansas Supreme Court determined the term “vacant” was not ambiguous despite the fact the policy did not define the term. After reviewing prior case law, the Supreme Court found the house in question was not lived in and lacked furniture and other amenities for human habitation. Consequently, the Supreme Court ruled there was no question the house was not occupied for “substantially all the purposes of a dwelling place.” 272 Kan. at 757. The Supreme Court went on to state there was no evidence anyone regularly visited the house or that the executor conducted on-site supervision of the premises, and “[a] reasonable person walking up to the house and looking through a window would conclude that it was ‘vacant’ as that term is understood in its plain and ordinary usage.” 272 Kan. at 757.
The Supreme Court in Speth noted the house lacked furniture and other amenities—Roullins and Daily largely rely on the fact the house in our case contained furniture and personal belongings and did not look vacant—Reliable argues Speth cannot be read as requiring a home to be devoid of contents in order to meet the definition of “vacant.”
Reliable submits Estes v. St Paul Fire & Marine Ins. Co., 45 F.Supp.2d 1227, 1230 (D.Kan.1999), to argue the house was vacant. The house at issue in Estes was filled with personal property. The Estes court stated: “The use of a dwelling for limited storage purposes ... does not establish that the dwelling was not vacant.” 45 F.Supp.2d at 1230. In Estes, the City of Kansas City, Kansas, found the plaintiff's rental house was “ ‘unfit for human habitation.’ “ 45 F.Supp.2d at 1228. The tenants moved out of the house, and the plaintiff attempted to repair the house as required by the City. The house had been unoccupied for 7 months when an unknown person set fire to the house. Plaintiff's insurer denied coverage under an exclusion that stated: “PAK II covers your home for vandalism and glass breakage as long as you haven't left it vacant for thirty days or more.' “ 45 F.Supp.2d at 1229.
The Estes court found the plain and ordinary meaning of “vacant” in the context of a dwelling and insurance policy exclusion for vandalism is that
“The structure is not lived in and lacks the basic amenities for human habitation. See Webster's Third New Int'l Dictionary (1986) at 2527 (‘vacant’ in context of dwelling is ‘premises which are not lived in and from which the furniture and fixtures have been removed’).... A reasonably prudent policyholder would have so understood the term ‘vacant’ in light of the surrounding vandalism exclusion, which clearly addressed the increased risk of vandalism in dwellings that were unoccupied or not otherwise under the protection of a guardian.” 45 F.Supp.2d at 1230.
The Estes court found the plaintiff failed to show the rental house had the minimal amenities necessary for human habitation in light of the City's notice that the house was unfit for human habitation. 45 F.Supp.2d at 1230. In response to the plaintiff's contention the house was not vacant because he was repairing and remodeling the house, the Estes court stated plaintiff had not shown “his repair efforts were of such frequency to establish that the dwelling ‘fell under the protection of a guardian.’ “ 45 F.Supp.2d at 1231. Finally, Estes noted the plaintiff and his wife described the house as “vacant.” On these grounds Estes found the plaintiff had no coverage for his loss. 45 F.Supp.2d at 1231.
Reliable submits Insurance Co. v. Johnson, 69 Kan. 146, 76 Pac. 419 (1904), and Robinson v. Insurance Co., 91 Kan. 850, 139 P. 420 (1914), as additional support this house was vacant.
In Johnson, the insurance policy's vacancy clause was found to exclude coverage when a windstorm destroyed a corncrib. The court in Johnson defined “vacant” in the insurance contract as:
“ ‘The meaning of the words “vacant and unoccupied,” as used in the contract of insurance, is that which the parties intended to give them; and that intention is to be found from the whole instrument, the subject-matter of the contract, and the situation of the property insured. The object of the stipulation against vacancy and nonoccupancy was to guard against the increased risk which arises from the absence of everybody whose duty or interest might afford some protection.’ “ 69 Kan. at 151 (quoting Moore v. Insurance Co., 64 N.H. 140, 142, 6 A. 27 [1886] ).
In Robinson, the insurer denied coverage to the plaintiff after fire destroyed the insured's property—a house and barn—based on the policy's vacancy clause. Robinson did not live in the house, but he was in the process of improving the house in order to move into it. Robinson had moved various items of furniture and personal property into the house, and the barn contained feed and often a horse. Robinson farmed the land and, consequently, he was at or in the house every day—“ ‘using it every day.’ “ Robinson, 91 Kan. at 853. Although Robinson occasionally ate in the house, he never slept there. The Robinson court referred to Johnson and its statement that a vacancy clause contemplated the protection of a guardian of the premises. Robinson applied the same rule but found “[i]n this case the premises were occupied by the owner for substantially all the purposes of a dwelling place except that sleeping there at night was deferred and meals were eaten there only occasionally.” 91 Kan. at 855.
The insurance policy in our case was issued to insure the property as a “dwelling,” which requires the structure to be lived in and used as more than a storage unit. The policy stated it covered “[t]he dwelling on the Described Location shown in the Declarations, used principally for dwelling purposes.” Dwelling is defined as: “The house or other structure in which a person or persons live; a residence; abode.” Blacks Law Dictionary 505 (6th ed.1990). Additionally, a reoccurring consideration in Speth, Johnson, and Robinson was the purpose of the vacancy clause—to protect against increased risks from the absence of persons in the dwelling. See Speth, 272 Kan. at 755–56; see also Vushaj v. Farm Bureau General Ins. Co. of Michigan, 284 Mich.App. 513, 516, 773 N.W.2d 758 (2009) (purpose of the vacancy provision “is to protect the insurance company from the increased risk that accompanies insuring a house that does not have an occupant”).
Unlike Robinson, Reliable contends Roullins did not utilize her house for substantially all the purposes of a dwelling house. Reliable points out that Roullins would stop by the house weekly and would pick up or drop off items; she never spent the night in the house; there were no utilities; there was a leaky roof; and she had been gone 3 1/2 years with no intent to return.
Roullins and Daily argue the Kansas City, Kansas, house was not “vacant” because it was full of Roullins' personal property. They bolster their argument by showing Roullins visited the home weekly to retrieve her personal items and Roullins' parents kept watch over the house. Roullins and Daily assert the house was used continuously for Roullins' own benefit; she could have resumed sleeping there at any time, and the utilities could have been turned on at any time.
Those facts are insufficient under Speth, Johnson, and Robinson. Roullins was not occupying the house by living there. This house was “vacant” as that term would be commonly understood in the policy. The record reflects intruders had entered the Kansas City house multiple times, suggesting Roullins and/or her parents did not provide adequate oversight or caretaking of the house to protect both the insured and insurer from perils. The district court's order granting summary judgment to Roullins and Daily under the occupancy endorsement and vandalism or malicious mischief exclusion is reversed.
Did the District Court Err in Granting Summary Judgment to Daily under the Mortgage Clause?
The district court also granted summary judgment to Daily under the mortgage clause, and Reliable claims that decision was contrary to the facts and in error. According to Reliable, the uncontroverted facts demonstrated Daily knew Roullins had not lived in the property for more than 60 days before the loss. Reliable claims she failed to notify the insurer of the change in occupancy, resulting in no coverage for her benefit. Daily counters she did not know if Roullins was living in the house, but she believed the house remained owner-occupied and full of Roullins' personal property. Thus, Daily had nothing to report to Reliable about the occupancy of the house.
Daily was the named mortgagee in the policy. The mortgage clause provided in relevant part:
“2. If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
“a. Notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware.”
The district court failed to make a ruling concerning whether Daily complied with the mortgage clause. At the conclusion of the hearing, the district court made the following comments concerning Daily.
“The Court is going to find that there really wasn't a stipulation as to Ms. Daily's testimony. It went back and forth as to what she knew. What was important to the Court with respect to Ms. Daily was the fact that Ms. Daily had mailed the keys back to the homeowner with the understanding she was going to pay it off. It wouldn't make any sense if she was foreclosing on the property that she would return those.”
The district court's comments on the record say nothing about whether Daily was aware of a change in occupancy. The journal entry of judgment lacks any ruling on the issue and merely mentions the clause and nothing more.
Summary judgment is appropriate if there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. K.S.A.2012 Supp. 60–256(c)(2). There are insufficient material facts to support the district court's decision as to Daily's knowledge or lack of knowledge to grant her summary judgment based on the mortgage clause.
The District Court's Award of Attorney Fees, Costs, and Prejudgment Interest is Reversed
Since we are reversing the district court's decision granting Roullins and Daily summary judgment, we also reverse the award of attorney fees, costs, and prejudgment interest for their benefit.
Conclusion
The summary judgment granted against Reliable on the claims by Roullins and Daily is reversed. The award of attorney fees, costs, and prejudgment interest to Roullins and Daily is also reversed. There were competing motions for summary judgment before the district court, and with our finding that the house was “vacant” and not used as a dwelling, we remand to the district court to enter summary judgment on behalf of Reliable under the occupancy endorsement and vandalism or malicious mischief exclusion of the policy. There remains a fact question under the mortgage clause of the policy as to Daily's knowledge of how the house was being used and her obligation under the policy to notify Reliable of any change in the use of the house. We remand for further proceedings to address the disputed facts.
Reversed and remanded for further proceedings consistent with this decision.