Becker v. Bar Plan Mut. Ins. Co.

429 P.3d 212

Daniel BECKER, Appellant,

v.THE BAR PLAN MUTUAL INSURANCE COMPANY, Appellee.

No. 113,291

Supreme Court of Kansas.

Opinion filed October 26, 2018.

Keynen J. Wall, of Forbes Law Group, LLC, of Overland Park, argued the cause, and Matthew T. Geiger and Benjamin R. Prell, of Geiger Prell, LLC, of Overland Park, and Daniel J. Langin, of Langin Law Firm, LLC, of Overland Park, were with him on the briefs for appellant.

James C. Morrow, of Morrow Willnauer Klosterman Church, LLC, of Kansas City, Missouri, argued the cause, and M. Todd Moulder and Marshall W. Woody, of the same firm, were with him on the briefs for appellee.

The opinion of the court was delivered by Per Curiam:

The district court granted summary judgment to The Bar Plan Mutual Insurance Company (The Bar Plan) on Daniel Becker's insurance coverage dispute with the company. A Court of Appeals panel affirmed the district court's decision. Both lower courts essentially concluded that contrary to Court of Appeals caselaw, Becker was asking for the coverage to be expanded beyond the insurance contract's terms.

We hold that both lower courts erred. Stated simply, they were wrong to rely upon "expansion of coverage" caselaw—and under the correct caselaw, questions of fact remain which are inappropriate for summary judgment. So we reverse both lower courts' decisions and remand to the district court for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

Between March 2010 and March 2012, Becker made a series of loans totaling $5,569,000 to Professional Cleaning and Innovative Services, Inc. (PCI). The business was owned by Brenda Wood.

Becker hired Sheila Seck and her law firm, Seck and Associates, LLC, to represent him in these loan transactions. But Seck failed to perform a UCC search on the collateral that Wood provided to secure Becker's loans. Consequently, Becker did not know Wood's collateral was already subject to a properly filed security interest of lender Farmers Bank. Becker would not have made the loans had he known of the bank's superior position. The PCI business eventually soured, and Wood's shaky financial situation was exposed. But Becker continued to make loans in a last-ditch effort to help Wood save the business.

In December 2011 Becker finally discovered the Farmers Bank UCC security interest filing, which dated back to 2007. Becker and Seck traded emails, with Becker asking why she had not found the prior filing and expressing his displeasure at her failure.

Finally, in Becker's February 6, 2012 email he fired Seck as counsel. He pointed out the errors that Seck had made:

"I have found and been advised of two monumental errors on your part. The first is an error in the UCC filing, where Brenda [Wood] pledged 900 shares and you filed 500. The second is the lack of diligence and attention in bothering to check to see if someone else had a lien on Brenda's assets.

....

"I found and [sic ] amazing lack of concern, diligence, prudence and ability to think outside the box in the performance of your services."

Becker concluded his email with a request that Seck inquire of her insurance carrier:

"Pls [sic ] forward my file or bring it over when you get the chance. I would also appreciate your inquiry with your Insurance carrier, as I have yet not quantified what I expect to be very large damages."

But later that day Becker sent Seck a friendlier email. In the following months, the two continued to have an amicable social relationship. They lived on the same block, and their children were friends. Seck and Becker's wife had lunch together, and they played tennis.

Becker initially focused his financial recovery efforts on Wood. But Wood's August 2012 declaration of bankruptcy caused Becker to shift his attention to Seck.

During this time, Seck had legal malpractice insurance through The Bar Plan. She had a policy in effect from October 2011 to October 2012 (2011 policy). And she renewed her coverage for October 2012 to October 2013 (2012 policy). The policy had a limit of $100,000 per claim and a $300,000 aggregate limit.

Seck did not advise The Bar Plan of Becker's February 6, 2012 email that notified Seck of her alleged "monumental" legal errors and that asked her to contact her insurance carrier. And in her insurance renewal application—filled out seven months later in September 2012—she did not mention the Becker situation.

Two months later, on November 12—after Becker's recovery efforts against Wood were unsuccessful—he sent a demand letter to Seck and her law firm. One week later, on November 19, Seck notified The Bar Plan of the demand.

Ten days later, on November 29, after Charles Coffey was assigned by The Bar Plan to the claim, he received a packet of information from Becker's attorney. It included Becker's February 6, 2012 email to Seck notifying her of her purported legal errors and asking her to contact her insurance carrier.

Coffey read the email at that time. He told Seck that he did not see any coverage issues initially but cautioned the claim would be subject to a more thorough analysis. Beginning in November 2012, Coffey requested Seck's files from her a number of times and, in an internal company email, eventually noted the ongoing difficulty in getting Seck to provide them.

On January 10, 2013, Becker filed suit for legal malpractice against Seck and her firm. By January 25, The Bar Plan had assigned attorney Mimi Doherty to Seck's defense. On February 4, after Doherty's initial review, she advised other attorneys at The Bar Plan that the case would be difficult to win and that The Bar Plan would probably want to settle. Seven days later on February 11, Seck ultimately provided her file to The Bar Plan.

On February 22, Becker's attorneys submitted a policy limits settlement offer for the aggregate limit of $300,000. This amount was based on their view that because Becker had made multiple loans, he had multiple claims of Seck's malpractice. But The Bar Plan's attorneys viewed this as a single claim—subject to a $100,000 limit—and let the settlement offer lapse.

Three days later, on February 25, Coffey began reviewing the file for insurance coverage issues. On March 5, a "coverage file" was opened and another attorney for The Bar Plan, Valerie Polites, was assigned to conduct a coverage review.

Six days later, on March 11, The Bar Plan sent Seck a reservation of rights letter. By March 28, Polites concluded Becker's claim was not covered due to Seck's untimely notice to the company. She drafted a denial of coverage letter and, approximately three weeks later, on April 16, sent it to Seck.

Becker's counsel renewed the $300,000 policy limits settlement demand. Meanwhile, Seck appealed the denial of coverage through The Bar Plan's appeal process. The Bar Plan denied her appeal.

On August 23, 2013 (after the denial of the coverage appeal), Seck confessed judgment to Becker for $3,905,000. She assigned Becker all her rights to sue The Bar Plan for bad faith as consideration for Becker's agreement not to enforce or collect on the judgment against her.

Four days later Becker filed a petition for "insurance bad faith" against The Bar Plan. Both sides moved for summary judgment, and the court granted The Bar Plan's motion.

The Court of Appeals affirmed. Becker v. The Bar Plan Mut. Ins. Co. , No. 113,291, 2015 WL 9459771 (Kan. App. 2015) (unpublished opinion). We granted Becker's petition for review of the panel's decision under K.S.A. 20-3018. Our jurisdiction is under K.S.A. 60-2101(b) (review of Court of Appeals decision).

ANALYSIS

Issue: An insurer's failure to give an adequate and timely reservation of rights can give rise to an insured's claim of estoppel.

Becker argues that The Bar Plan assumed Seck's defense without a timely reservation of rights and that Seck detrimentally relied on its assumption of her defense. He concludes The Bar Plan therefore should have been estopped from asserting any coverage defenses. Hence the lower courts erred in ruling against him.

The Bar Plan responds that the district court correctly applied the law to deny Becker's motion for summary judgment and to determine that waiver and estoppel were not warranted to expand coverage beyond that actually contracted for by the parties. It reasons that if Becker cannot prove the contract of insurance ever provided coverage, then neither waiver nor estoppel can apply to provide any coverage.

Standard of review

Because this case was decided under K.S.A. 60-256, summary judgment standards are applied on appellate review. An appellate court reviews summary judgment de novo. South Central Kansas Health Ins. Group v. Harden & Co. Ins. Services, Inc. , 278 Kan. 347, 350, 97 P.3d 1031 (2004) (citing Associated Wholesale Grocers, Inc. v. Americold Corp. , 261 Kan. 806, 820, 934 P.2d 65 [1997] ); see Martin v. Naik , 297 Kan. 241, 246, 300 P.3d 625 (2013).

The standard for summary judgment is well-known:

" ‘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 when we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.’ [Citation omitted.]" Drouhard-Nordhus v. Rosenquist , 301 Kan. 618, 622, 345 P.3d 281 (2015) ; Chism v. Protective Life Ins. Co. , 290 Kan. 645, 653, 234 P.3d 780 (2010).

The facts are not disputed.

"When the evidence

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