Opinion
No. 106,661.
2012-08-3
Jeremy A. WILES, Appellee, v. AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS (AFLAC), Appellant.
Appeal from Wyandotte District Court; Daniel A. Duncan, Judge. Jessica R. Beever and Bryan M. Groh, of Evans & Dixon, LLC, of Kansas City, Missouri, for appellant. Donald W. Vasos and David A. Hoffman, of Vasos Law Offices, of Fairway, for appellee.
Appeal from Wyandotte District Court; Daniel A. Duncan, Judge.
Jessica R. Beever and Bryan M. Groh, of Evans & Dixon, LLC, of Kansas City, Missouri, for appellant. Donald W. Vasos and David A. Hoffman, of Vasos Law Offices, of Fairway, for appellee.
Before BRUNS, P.J., MARQUARDT and HILL, JJ.
MEMORANDUM OPINION
PER CURIAM.
American Family Life Assurance Company of Columbus (AFLAC) appeals the district court's decision that Jeremy Wiles' injuries were covered under his hospital intensive care policy with AFLAC. The trial court found that AFLAC's denial of Wiles' claim was without just cause and awarded Wiles attorney fees and costs. We reverse and remand for new trial.
On March 20, 2009, Jeremy Wiles had been watching the NCAA basketball tournament and drinking vodka at a friend's house. While on his way to another friend's house at approximately 9:30 p.m., he had a single vehicle accident in Leavenworth County. Wiles was driving too fast, tried to navigate an S-curve, lost control of his truck, ran into a ditch, and the truck overturned. Wiles testified that he ended up “laying [ sic ] slouched over [his] center console.”
Wiles testified that he told EMS personnel at the scene of the accident that he had been drinking vodka earlier in the evening but was unable to say how much he had consumed. Wiles also admitted that he told the EMS personnel that he could not remember how the accident occurred. Wiles sustained serious injuries and was transported by helicopter to the University of Kansas Hospital (hospital) for emergency medical treatment. Wiles suffered a spinal cord injury, which caused quadriplegia and paralysis. While at the hospital, Wiles underwent a routine blood test that revealed he had a blood alcohol concentration of .250.
On the date of his accident, Wiles had a hospital intensive care insurance policy (policy) with AFLAC. On March 27, 2009, Wiles submitted a claim to AFLAC for benefits under this policy. On April 3, 2009, AFLAC denied Wiles' claim for benefits citing Section 2(D)(4) of the policy, which excluded losses “sustained or contracted due to a covered person's being intoxicated or under the influence of alcohol, drugs or any narcotic unless administered on the advice of a physician and taken according to the physician's instructions.”
Even though the accident occurred in Leavenworth County, Wiles filed a petition in Wyandotte County, claiming that (1) AFLAC's denial of his claim for benefits “to its insured was without just cause or excuse for which reasonable attorney's fees are due and owing pursuant to K.S.A. 40–256” and (2) AFLAC “failed to conduct a good faith investigation and evaluation of the facts and circumstances of plaintiffs claim.”
Wiles and AFLAC both filed motions for summary judgment. At the hearing on the summary judgment motions, the district court found that Section 2(D)(4) of Wiles' hospital intensive care policy did not provide sufficient protection to the insured as required by K.S.A. 40–2203(B)(l 1). Accordingly, the district court replaced section 2(D)(4) of the policy with K.S.A. 40–2203(B)(l 1), which provides that an insurer shall not be liable “for any loss sustained or contracted in consequence of the insured's being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.” AFLAC did not contest this ruling. The district court denied both motions for summary judgment and set the case for a bench trial.
To support its claim that the policy excluded Wiles' accident, AFLAC relied on the testimony of Deputy Chad Sanberg of the Leavenworth County Sheriff's Office. Deputy Sanberg testified that at approximately 9:43 p.m. he responded to a call to investigate Wiles' accident. Deputy Sanberg noted that the evening weather was normal, the road surface area was asphalt, there were no obstructions on the roadway, the area was not a high traffic area, and Wiles' truck was the only vehicle involved in the accident. Deputy Sanberg testified that the common effects of alcohol consumption include slow reaction time, impaired judgment, slurred speech, and difficulty maintaining train of thought. Finally, Deputy Sanberg indicated in his law enforcement accident report that alcohol contributed to Wiles' accident.
AFLAC sought admission of the laboratory toxicology report, showing Wiles' blood alcohol concentration was .250 within 2 hours after the accident. Angela Buisch, a nurse at the hospital, testified about the procedures hospital staff follow when drawing blood from a patient. She testified that the draw site is prepared with Chloraprep, a needle is inserted into the site, and the blood is drawn into a vacutainer tube. The person who performed the blood draw would then label the tube with his or her initials and write the time that the blood was drawn. Buisch stated that after the blood is drawn, the tube is placed in a plastic bag and is transported directly from the trauma area of the hospital to the laboratory area via a system of transportation tubes. Buisch acknowledged that she was working in the emergency room at the hospital on the evening of March 20, 2009, but she could not remember if she was the individual who drew Wiles' blood that night. However, she testified that she has personally observed her coworkers draw blood from other patients and that her coworkers follow the hospital's procedures when drawing blood from patients.
AFLAC also offered the deposition testimony of Brian Selig, a nurse manager of the emergency department at the hospital, who testified about the procedures employees follow when drawing blood from a patient. Specifically, Selig testified that a tube containing a patient's blood sample is marked with a sticker that is included in a patient's medical chart. The individual who draws blood from a patient is trained to compare the patient's personal identifying information on the sticker with the personal identifying information on the patient's hospital bracelet. After comparing this information, the individual who drew the blood sample labels the tube with that person's initials, the date, and the time. Selig had no knowledge of whether the hospital's medical procedures were followed when Wiles' blood was drawn, but he stated any nurse or laboratory technician who draws blood from a patient is trained to follow the hospital's procedures.
Rochelle Mason, a phlebotomist, testified that she works in the lab processing department at the hospital and that she processed Wiles' blood sample on March 20, 2009. When blood samples arrive in the lab area, Mason inputs information into the computer system specifying what tests should be performed. Mason testified that when she processed Wiles' blood sample, she followed the hospital's protocols and procedures.
The deposition testimony of Vicki Parsons, the assistant director in the clinical laboratory at the hospital, was admitted into evidence. Parsons explained that after a blood sample is processed by a lab technician, the sample is placed on the automation line for testing. After being placed on the automation line, a blood sample is centrifuged, and then the various components of the blood sample are tested by an instrument known as the DXC 800. The results of the tests are then sent to the hospital's computer system. According to Parsons, the computer system that processes test results is monitored annually to ensure that it is operating within acceptable parameters. Parsons also indicated that the DXC 800 is subjected to a daily control test and a biannual maintenance test to ensure that the machine is functioning properly. Parsons testified that a daily control test was performed on the DXC 800 at 7 a.m. on March 20, 2009.
Parsons reviewed the toxicology report from Wiles' blood test and identified the report as a document generated from the hospital's laboratory information system. However, Parsons admitted that she had no personal knowledge of the procedures followed during the drawing of Wiles' blood sample or what was done during the testing of that sample.
AFLAC moved to admit a copy of the toxicology report; Wiles objected, citing a lack of foundation. AFLAC moved to have the toxicology report admitted as a business record; Wiles objected again, claiming that AFLAC failed to lay a foundation for its admission. The district court sustained both of Wiles' objections without further comment. However, the court did admit the toxicology report for the limited purpose of evaluating the sources of information that AFLAC relied upon in denying Wiles' claim for benefits.
AFLAC and Wiles also read into evidence portions of the deposition testimony of Jennifer Jeeter, a claims manager for AFLAC. According to Jeeter, AFLAC evaluated Wiles' claim by reviewing the report of Deputy Sanberg, the toxicology report, and the provisions of Wiles' policy. Specifically, Jeeter testified that AFLAC denied Wiles' claim for benefits based upon the circumstances surrounding the accident, the fact that Deputy Sanberg indicated alcohol contributed to the accident, and Wiles' blood alcohol concentration of .250. However, Jeeter admitted that AFLAC did not interview any witnesses during its investigation.
At some point during his hospitalization, Wiles told his wife that he lost control of his truck while he was reaching for his cell phone. On March 24, 2009, Wiles was interviewed by Detective Dan Abramovitz of the Leavenworth County Sheriff's Office. Wiles also told Detective Abramovitz that he lost control of his truck while he was reaching for his cell phone. Wiles admitted drinking vodka earlier that evening but was unable to remember how much he had consumed. Wiles did recall telling members of the life flight crew who transported him to the hospital that he had consumed vodka earlier that evening but did not tell them what caused the accident.
On June 21, 2011, the district court entered judgment for Wiles and awarded him $6,000 in benefits and costs. The court found that AFLAC did not have just cause or excuse in denying Wiles' claim and failed to conduct a reasonable investigation into the merits of Wiles' claim for benefits. However, the district court deferred ruling on Wiles' request for attorney fees until Wiles had an opportunity to file a written request.
Wiles filed a motion requesting attorney fees, interest, and costs. In support of his motion, Wiles attached an invoice showing the time his attorney had worked on Wiles' case. Wiles also submitted an affidavit prepared by attorney Nick Badgerow, which attested to the reasonableness of the $350 per hour rate charged by Wiles' attorney. AFLAC opposed Wiles' request for attorney fees, interest, and costs and also moved for a new trial or an order altering or amending the judgment.
On July 19, 2011, the district court denied AFLAC's motion for a new trial or to alter or amend the judgment and entered an order awarding Wiles $6,000 on his claim, $61,005 in attorney fees, and costs in the amount of $622.45, plus interest. On August 8, 2011, AFLAC filed its notice of appeal.
AFLAC raises four issues in its appeal: (1) whether the district court erred in refusing to admit the toxicology report from Wiles' blood test; (2) whether the district court erred in finding that Wiles' losses were not sustained or contracted in consequence of his intoxication; (3) whether the district court erred in finding that AFLAC acted without just cause or excuse in denying Wiles' claim for benefits; and (4) whether the district court abused its discretion in awarding Wiles attorney fees.
Refusal to Admit the Toxicology Report
An appellate court reviews a trial court's rulings regarding the adequacy of foundation evidence for an abuse of discretion. An appellate court will not disturb a trial court's ruling on such an issue so long as the ruling is supported by substantial competent evidence. City of Overland Park v. Cunningham, 253 Kan. 765, 772–73, 861 P.2d 1316 (1993). Substantial competent evidence is such evidence that “possesses both relevance and substance and provides a substantial basis of fact from which the issues can be reasonably determined.” Frick Farm Properties v. Kansas Dept of Agriculture, 289 Kan. 690, 709, 216 P.3d 170 (2009).
AFLAC contends that it laid a sufficient foundation to support the admission of the toxicology results of Wiles' blood test into evidence. AFLAC submits that the testimony of Angela Buisch, Brian Selig, Rochelle Mason, and Vicki Parsons established that “emergency and laboratory personnel follow the procedures in place at KU Medical Center to ensure blood tests are properly obtained, marked, and tested.” AFLAC also argues that the testimony of these four witnesses established that these procedures were followed in obtaining, marking, and testing Wiles' blood sample.
In a civil case, the results of a laboratory blood test are admissible if the test results are relevant and material to resolving issues in the dispute and if the party seeking admission of the test results presents evidence establishing: (1) that the blood sample was taken under appropriate circumstances to guard against contamination; (2) that the sample was properly marked and conveyed to the laboratory; and (3) that the chemical testing was properly conducted by competent personnel. Divine v. Groshong, 235 Kan. 127, Syl. ¶ 2, 679 P.2d 700 (1984).
AFLAC asserts that it presented sufficient evidence to satisfy these foundational requirements, even though no witness was able to: (1) specifically testify about the circumstances surrounding the drawing of Wiles' blood and explain the procedures that were followed during that blood draw; or (2) verify that the sample obtained from Wiles was properly marked and sent to the laboratory for testing.
To support its argument that the results of a blood test should be admissible in a civil case, AFLAC cites several cases from other jurisdictions. See Sullivan v. Municipality of Anchorage, 577 P .2d 1070 (Alaska 1978) (holding that results of blood test were admissible in DUI prosecution, despite absence of testimony from individual who performed the blood draw, when the procedure is performed in a hospital and the results are recorded in hospital files); State v. Gilpin, 132 Idaho 643, 977 P.2d 905 (Ct.App.1999) (holding that blood test results were admissible in vehicular manslaughter prosecution, despite absence of testimony from person who drew blood, when there was testimony establishing hospital's protocols and procedures for drawing blood).
Although Sullivan and Gilpin support AFLAC's position that the results of a blood test are admissible even though the individual who drew the blood sample is unidentified and fails to testify, those cases are nonetheless persuasive authority. Further, we noted that both Sullivan and Gilpin are criminal cases, and the courts in both of those cases were attempting to resolve the issue of what constitutes an adequate evidentiary foundation for the admission of blood test results under the unique laws of each respective state. Thus, even though Sullivan and Gilpin do support AFLAC's position, those cases are not dispositive in determining whether the district court should have admitted the toxicology report of Wiles' blood test in this case.
State v. Davis, 41 Kan.App.2d 1034, 207 P.3d 281 (2009), addressed the admissibility of blood test results in a criminal case with circumstances similar to this case. In Davis, the Kansas Highway Patrol ordered Davis to submit to a blood test to determine his blood alcohol concentration after Davis was charged with driving under the influence. Alojacin, a medical technologist, performed the blood draw, but at trial she could not recall working on the date in question and had no memory of drawing blood from Davis. Davis objected to admission of the KBI lab report derived from his blood test results, arguing that the State failed to provide sufficient foundation to admit the report; Davis argued that the State could not demonstrate that the blood draw was performed in a medically reasonable manner because Alojacin could not remember performing the procedure. The district court found that the report from Davis' blood draw was admissible. The district court concluded that the drawing of blood by a medical technologist who regularly works in that capacity at the local hospital using the equipment described is appropriate and reasonable. Davis, 41 Kan.App.2d at 1036.
On appeal, a panel of this court addressed whether the State presented sufficient foundation to admit the results of Davis' blood test when the medical professional who performed the procedure could not remember the details of the procedure. The panel held that the results of Davis' blood test were admissible and concluded that Alojacin's inability to recall the circumstances of the procedure was not fatal because “such an inability is not unexpected when a routine blood draw is taken by someone who performs such draws on a daily basis.” Davis, 41 Kan.App.2d at 1041. The panel also determined that the evidence permitted the court to infer that the blood draw was performed in a medically reasonable manner because a licensed medical professional was performing a routine procedure, and there was no evidence to suggest that the procedure was performed in an unreasonable manner. Davis, 41 Kan.App.2d at 1041.
Applying the rationale of Davis, we find that AFLAC presented sufficient evidence to permit the court to find that Wiles' blood sample was taken in a medically reasonable manner by a licensed medical professional performing a routine procedure—it was properly drawn, marked, and transported to the laboratory. Both Buisch and Selig testified about the procedures followed by employees of the hospital when drawing a blood sample from a patient.
The testimonies of Buisch and Selig describing the hospital's procedures for performing a routine medical procedure—a blood test—at the hospital provided sufficient foundation that the hospital employee who drew Wiles' blood complied with the hospital's protocols and procedures. Furthermore, there was no evidence showing that the individual who drew Wiles' blood failed to comply with the hospital's protocols and procedures when drawing that sample. AFLAC presented sufficient evidence to satisfy the first two requirements of the Divine test for the admissibility of the results of a blood test in a civil case.
However, Wiles contends that AFLAC has failed to satisfy the requirements of the Divine test because it never presented the testimony of the witness who actually drew Wiles' blood, labeled the tube, and transported it to the hospital lab for testing. AFLAC asserts that Buisch was likely the nurse who drew Wiles' blood sample, labeled the tube, and sent the tube to the hospital lab for testing.
Buisch's inability to remember whether she was the person who drew Wiles' blood sample is similar to Alojacin's memory deficiencies in Davis. Similarly, Buisch's inability to remember is not significant or unusual because drawing blood is a routine medical procedure that Buisch likely performs on a consistent basis as part of her job duties. Her inability to remember one particular blood draw on one particular evening is, therefore, not unusual.
Additionally, Wiles seems to intimate that his blood sample may have been contaminated by the substance used to prepare the draw site. During her testimony, Buisch testified that she believed Chloraprep—the substance used to prepare a site for a medical blood draw—contained alcohol. However, Buisch indicated that she could not say with one hundred percent certainty that Chloraprep contained alcohol. Buisch's testimony alludes to the possibility that Wiles' blood sample could have been contaminated, but her testimony does not render the results of the blood test totally unreliable. Accordingly, any concern that Wiles' blood test was contaminated more likely goes to the weight of the evidence and not to its admissibility. See State v. Horton, 283 Kan. 44, 61, 151 P.3d 9 (2007) (noting that issues with contamination or chain of custody impact the weight of evidence unless evidence is so tainted so as to render test results unreliable).
One additional issue from Davis is that it was clear that Alojacin was the individual who drew Davis' blood sample because Alojacin's handwriting was contained on a form that is filled out by the individual after obtaining a blood sample. In this case, Wiles' trauma sheet contained no signature identifying the hospital employee who drew his blood sample. However, Buisch explained that this sometimes occurs when a patient is in critical condition and needs to be moved quickly to obtain further treatment. Buisch further explained that the patient's trauma chart accompanies the patient as the patient is moved around the hospital. It is undisputed that Wiles suffered serious injuries from his accident. Therefore, the absence of a signature on Wiles' trauma sheet identifying who drew his blood sample is not unusual or peculiar because there may not have been sufficient time to record that information. The hospital's primary concern was administering lifesaving medical treatment to Wiles, not ensuring that each clerical recordation procedure was zealously followed.
The issue is whether AFLAC presented sufficient evidence that Wiles' blood sample was drawn under appropriate conditions to guard against contamination and to show that the sample was properly marked and sent to the hospital lab for testing. Wiles' blood sample was drawn at the hospital, and the procedure was performed by a trained medical professional. Additionally, the testimony of Buisch and Selig provides the panel with sufficient evidence that the employee who drew the blood complied with the hospital's procedures to guard against contamination, followed the hospital's procedures in properly labeling the sample, and transported Wiles' blood sample to the hospital lab via the pneumatic tube transport system.
The third requirement for admissibility of the results of a blood test in a civil case analyzes whether the testing is properly conducted by competent personnel. Divine, 235 Kan. at 133. Mason, a phlebotomist in the lab processing department of the hospital, testified that she followed the hospital's protocols and procedures when she processed Wiles' blood sample. Moreover, Parsons, the assistant director in the clinical laboratory at the hospital, explained that after a blood sample is processed by a lab technician, the sample is placed on the automation line for testing. Parsons also explained that the DXC 800 is the instrument that performs the testing, and the results of any tests are processed and analyzed by the hospital's computer. Parsons testified that the DXC 800 and the hospital's computer undergo routine maintenance and testing to ensure that both devices are functioning properly.
The testimonies of Mason and Parsons were sufficient to establish that the testing of Wiles' blood sample was properly conducted by competent personnel. Although the actual testing of Wiles' blood sample was performed by an automated instrument and not an actual laboratory technician, this fact alone does not render the results of Wiles' blood test unreliable. AFLAC established that the lab technician who processed Wiles' blood sample followed the hospital's protocols, and it established that the instrument that ran the tests and the computer that processed the results were both maintained to ensure proper functionality. This evidence is sufficient to demonstrate that Wiles' blood test was properly conducted by competent personnel.
Finally, in order for the results of a blood test to be admissible in a civil action, the test results must be relevant and material to the issues presented in the case. Divine, 235 Kan. at 133. Evidence is relevant if it has “any tendency in reason to prove any material fact.” K.S.A. 60–401(b). Evidence is material if it relates to a fact that has a legitimate and effective bearing on the resolution of the case. Kansas City Mall Associates, Inc. v. Unified Gov't of Wyandotte County/KCK, 294 Kan. 1, 12, 272 P.3d 600 (2012).
The result of Wiles' blood test was relevant to this case. AFLAC denied Wiles' claim for benefits under his policy because it asserted that Wiles' injuries were caused by his intoxication. A laboratory report showing that Wiles had a blood alcohol concentration of .250 around the time of his accident is evidence tending to show that intoxication could have contributed to or caused Wiles' accident. The result of Wiles' blood test was also material to the dispute. The central issue in this case was whether Wiles' accident was the result of intoxication or the result of inattentiveness. The results of Wiles' blood test supported AFLAC's argument that intoxication, and not inattentiveness, was the cause of Wiles' accident. The result of Wiles' blood test was also material because the presence of a blood alcohol concentration in excess of .08 triggers a presumption that an individual was under the influence of alcohol to a degree that rendered the person incapable of safely operating a motor vehicle. K.S.A. 8–1005(b). Our Supreme Court has recognized that this presumption applies in civil cases as well as criminal cases. Divine, 235 Kan. at 138.
Finally, the district court's refusal to admit the results of Wiles' blood test without the testimony of the hospital employee who drew Wiles' blood, labeled it, and sent it to the laboratory placed a heavy burden upon AFLAC. During the testimony of Buisch and Selig, both witnesses discussed the differences between the procedures for a blood draw for medical purposes and a blood draw performed for legal purposes. When hospital personnel perform a blood draw for legal purposes, a law enforcement officer is present, the tube containing an individual's blood is transferred to the officer, and then the person who performed the blood draw fills out a chain of custody log with the receiving officer.
In a blood draw performed for legal purposes, law enforcement are present during the procedure and are able to record the name of the person who performed the procedure. Ascertaining the identity of the person who performed the blood draw is also significant in a blood draw performed for legal purposes because K.S.A.2011 Supp. 8–1001(c) requires that only certain qualified medical professionals perform a blood draw on an individual suspected of driving under the influence.
In contrast, in this case, agents from AFLAC were not present when the procedure was performed. A dispute as to whether procedures were followed and whether those procedures were adequate arose only after AFLAC denied Wiles' claim for benefits, which was nearly 2 weeks after Wiles' blood was drawn and tested. The district court should not have required AFLAC to present the testimony of the actual witness who drew a blood sample from Wiles; AFLAC had no opportunity to record the names of the hospital employees involved, and detailed records were not maintained due to the critical circumstances present in the emergency room.
In conclusion, the testimony of Buisch, Selig, Mason, and Parsons constituted substantial competent evidence demonstrating that Wiles' blood sample was obtained under appropriate conditions to guard against contamination, that the sample was properly marked and conveyed to the hospital lab for testing, and that the testing was properly conducted by competent personnel. The results of Wiles' blood test were also relevant and material to resolving the issue of whether Wiles' accident and resulting injuries were sustained or contracted in consequence of his intoxication. Therefore, the district court abused its discretion in refusing to admit the toxicology report from Wiles' blood test into evidence. We reverse the decision of the district court and remand the case for a new trial.
Cause of the Accident
The district court found that AFLAC failed to meet its burden to show that Wiles' injuries were sustained or contracted in consequence of his intoxication. AFLAC challenges the district court's finding on this issue in two respects. First, AFLAC claims that the district court incorrectly interpreted the language excluding coverage for losses “sustained or contracted in consequence of the insured's being intoxicated” to mean that AFLAC must prove that Wiles' intoxication was the cause of his accident.
Finding a party did not meet its burden of proof is a negative factual finding. An appellate court's standard of review for a negative finding of fact “is that the party challenging the finding must prove arbitrary disregard of undisputed evidence or must prove some extrinsic consideration such as bias, passion, or prejudice.” Hall v. Dillon Companies, Inc., 286 Kan. 777, 781, 189 P.3d 508 (2008). The interpretation of the provisions of an insurance contract is a question of law over which appellate courts have unlimited review. National Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 257, 225 P.3d 707 (2010).
Second, AFLAC contends that even without the toxicology report, there was still sufficient evidence upon which the district court could rely to find that Wiles' injuries were sustained or contracted in consequence of his intoxication. In order to demonstrate that the district court's finding was in error, AFLAC must show that the district court arbitrarily disregarded undisputed evidence or reached its decision based upon extrinsic considerations such as bias, passion, or prejudice. AFLAC argues that the court ignored or discounted specific evidence.
The evidence cited by AFLAC consists of the following: (1) Wiles' admission that he had consumed vodka on the evening of his accident; (2) Wiles' accident occurred on a Friday night at approximately 10 p .m.; it involved one vehicle and one victim; there were no adverse weather conditions; the surface of the road was blacktop; there were no obstructions in the roadway; and the area was not a high traffic area; and (3) the second page of Deputy Sanberg's law enforcement report, where he marked that alcohol contributed to the accident.
Because this case is being remanded to the district court for a new trial, we will not make any findings or conclusions on this issue.
Just Cause for Denial of the Claim
An appellate court reviews a trial court's determination of whether an insurance company acted without just cause or excuse in denying an insurance claim for an abuse of discretion. Judicial discretion is abused when no reasonable person would take the view adopted by the trial court. Tradesmen Int'l, Inc. v. Wal–Mart Real Estate Business Trust, 35 Kan.App.2d 146, 164, 129 P.3d 102 (2006).
K.S.A. 40–256 provides:
“That in all actions hereafter commenced, in which judgment is rendered against any insurance company ..., if it appear from the evidence that such company ... has refused without just cause or excuse to pay the full amount of such loss, the court in rendering such judgment shall allow the plaintiff a reasonable sum as an attorney's fee for services in such action....”
Whether an insurance company acted without just cause or excuse in refusing to pay a claim for benefits under an insurance policy is decided on the facts and circumstances of each case. Johnson v. Westhoff Sand Co., Inc., 31 Kan.App.2d 259, 274, 62 P.3d 685,rev. denied 275 Kan. 964 (2003). Our Supreme Court has construed the phrase “without just cause or excuse” to mean a denial that is frivolous, unfounded, and patently without any reasonable foundation, Clark Equip. Co. v. Hartford Accident & Indemnity Co., 227 Kan. 489, 494, 608 P.2d 903 (1980). In refusing to pay a claim, an insurance company has a duty to perform a good faith investigation of the facts and circumstances surrounding an insured's claim. A court must deny an award of attorney fees when a good faith legal controversy as to liability exists. Fletcher. Anderson, 29 Kan.App.2d 784, 786, 31 P.3d 313 (2001).
AFLAC asserts that it acted with just cause in denying Wiles' claim for benefits under his policy. AFLAC argues that Sanberg's law enforcement report and Wiles' medical reports reasonably allowed it to conclude that Wiles' intoxication caused his accident.
Wiles contends that AFLAC acted without just cause or excuse in denying his claim because it failed to conduct a reasonable investigation before denying his claim. In support of his argument, Wiles points to the following evidence: (1) AFLAC denied his claim 6 days after it was submitted; (2) AFLAC did not interview any witnesses, law enforcement personnel, or medical personnel; and (3) AFLAC's claims manager stated that AFLAC had no plan to investigate further.
Prior to determining whether AFLAC acted without just cause or excuse in denying Wiles' claim, one must first determine whether AFLAC performed a good faith investigation into the merits of Wiles' claim. AFLAC asserts that no additional investigation was required because they had the investigating officer's accident report, Wiles' blood test results, and the provisions of Wiles' insurance policy. The accident report showed that: (1) this was a single vehicle accident; (2) the accident involved a single victim; (3) the accident occurred at approximately 10 p.m. on a Friday night; (4) there were no adverse weather conditions; (5) there was no obstruction in the road; (6) traffic was light; (7) the road surface was asphalt; (8) the victim admitted to drinking vodka before driving; and (9) the investigating officer's report marked the box indicating that “alcohol contributed” to the accident.
In finding that AFLAC acted without just cause or excuse in denying Wiles' claim, the district court repeatedly stated that AFLAC “did nothing.” However, this description of AFLAC's investigation is inaccurate. Although AFLAC certainly could have performed additional investigation or interviewed witnesses, AFLAC did review Sanberg's report, Wiles' blood test results, and the provisions of his insurance policy before it denied his claim. Thus, it is inaccurate to state that AFLAC did nothing to investigate Wiles' claim.
Furthermore, based upon Sanberg's report and the results of Wiles' blood test, AFLAC possessed sufficient evidence to support the argument that Wiles' intoxication caused his accident. Even if AFLAC had interviewed Wiles, Wiles' wife, or Abramovitz, those interviews would not have diminished the import of the evidence that AFLAC already possessed. At that point, a good faith legal controversy as to liability would still have existed because there would have been two plausible explanations for Wiles' accident; Wiles' accident could have been caused by intoxication or by inattentiveness. Thus, AFLAC was not required to perform any additional investigation beyond what it did because additional investigation would not have negated the existence of a good faith legal controversy as to the existence of liability. See Knuth v. State Farm Mut. Auto. Ins. Co., 30 Kan.App.2d 184, 186, 41 P.3d 287 (2000) (concluding that insurer acted with just cause in denying insured's claim and no further investigation was required because insurer's actual investigation revealed evidence creating a good faith legal controversy).
AFLAC's denial of Wiles' claim for benefits under his policy was not frivolous, unfounded, or patently without any reasonable foundation considering the facts and circumstances of Wiles' accident, the fact that Wiles admitted consuming vodka the night of his accident, and the fact that a blood test revealed that Wiles had a blood alcohol concentration of .250 around the time of his accident. Based upon this evidence, no reasonable person could conclude that AFLAC acted without just cause or excuse in denying Wiles' claim. Therefore, the district court abused its discretion in finding that AFLAC acted without just cause or excuse in denying Wiles' claim for benefits. We find that AFLAC acted with just cause or excuse in denying Wiles' claim. We reverse the district court on this issue.
Attorney Fees
An appellate court reviews a trial court's award of attorney fees for an abuse of discretion. A trial court abuses its discretion when no reasonable person would take the position adopted by the trial court. The trial court is considered an expert on the issue of attorney fees and may apply its knowledge and experience in calculating an award. However, if an appellate court finds that the trial court abused its discretion in awarding attorney fees, then an appellate court may award such fees as it determines are reasonable. Johnson, 31 Kan.App.2d at 274–75. In reviewing an award of attorney fees, an appellate court does not reweigh the testimony or the evidence presented or reassess the credibility of witnesses. Snider v. American Family Mut. Ins. Co., 45 Kan.App.2d 196, 200, 244 P.3d 1281 (2011).
In evaluating the reasonableness of an award of attorney fees, the panel must consider the eight factors set forth in Supreme Court Rule 1.5(a) (2011 Kan. Ct. R. Annot. 460) of the Kansas Rules of Professional Conduct. Palmer v. Bill Gallagher Enterprises, LLC, 44 Kan.App.2d 560, 571, 240 P.3d 592 (2010). Those eight factors are: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent. Supreme Court Rule 1.5(a).
In support of his request for attorney fees, Wiles' attorney included a detailed invoice showing the time that Wiles' attorney spent working on the case. The district court reviewed the time sheet and found that the time that Wiles' attorney spent working on Wiles' case appeared reasonable and legitimate.
AFLAC contends that the case involved “a simple and routine question of insurance coverage.” However, the trial court apparently disagreed with this argument. In this case, Wiles and AFLAC sparred over the correct interpretation of the meaning of language in the insurance contract that excluded losses “sustained or contracted in consequence of the insured's being intoxicated.” Both sides submitted summary judgment motions and filed several memoranda arguing over the correct interpretation of this policy language. Thus, the issue involved was neither simple nor routine.
We find no fault in the district court's analysis of the criteria for awarding fees. However, because we have found that the district court abused its discretion in finding that AFLAC acted without just cause or excuse in denying Wiles' claim for benefits, we reverse the trial court's award of attorney fees.
Reversed and remanded for new trial.