Terry v. Esurance Ins. Co.

638 F.Supp.3d 1263

Meechelle TERRY and Brandon Terry, Plaintiffs, v. ESURANCE INSURANCE COMPANY, Defendant.

Case No. 21-cv-1119-EFM

United States District Court, D. Kansas

Signed November 1, 2022

Don P. Saxton, Saxton Law Firm, Kansas City, MO, Joseph M. McGreevy, McGreevy Law, LLC, Westwood, KS, for Plaintiffs.

Christopher Robert Staley, Curtis 0. Roggow, Sanders Warren & Russell, LLP, Overland Park, KS, for Defendant.

MEMORANDUM AND ORDER

ERIC F. MELGREN, CHIEF UNITED STATES DISTRICT JUDGE

The residence of Plaintiffs Meechelle and Brandon Terry was damaged in an accidental fire. That residence was insured under a Policy issued by Defendant Esurance Insurance Company. Defendant made several payments under the Policy but has declined, citing an exclusion under the Policy, to make payments for what it deemed increased costs necessary to comply with building codes. Plaintiffs and Defendant each seek partial summary judgment on this issue. Plaintiff argues that, as a matter of law, the exclusion relied upon by Defendant is void and unenforceable under Kansas law. In the alternative, they contend that the exclusion is not properly applied to their situation as no building codes govern their residence. Defendant urges the Court to arrive at the opposite conclusion for each of these contentions.

Additionally, Defendant seeks partial summary judgment that Plaintiffs cannot recover beyond the policy limits for additional living expenses, and that Brandon Terry's omissions in his personal bankruptcy case require that the doctrine of judicial estoppel be applied to bar his claims. As set out more fully below, the Court grants Plaintiffs' Motion for Partial Summary Judgment (Doc. 68), and grants in part and denies in part Defendant's Motion for Partial Summary Judgment (Doc. 66).

I. Factual and Procedural Background

Plaintiffs own a house in Kanorado, Sherman County, Kansas. This house and Plaintiffs' personal property is insured under a Policy issued by Defendant. The Declarations section of the Policy shows a limit of liability of $274,750 for Dwelling Protection, $164,850 for Personal Property Protection, and $27,475 for Additional Living Expenses.

The Policy states that Defendant "will cover sudden and accidental direct physical loss to property described in Dwelling Protection-Coverage A and Other Structures Protection—Coverage B except as limited or excluded in this policy."¹ One such exclusion is the following:

Under Dwelling Protection-Coverage A and Other Structures Protection-Coverage B of this policy, "we" do not cover any loss which consists of, is caused by, or would not have occurred but for, one or more of the following excluded events, perils or conditions. Such loss is excluded regardless of: a) the cause or source of the excluded event, peril or condition; b) any other causes contributing concurrently or in any sequence with the excluded event, peril or condition to produce the loss; or c) whether the excluded event, peril or condition involves isolated or widespread damage, arises from natural, man-made or other forces, or arises as a result of any combination of these forces.

6. Actions taken by civil, governmental or military authorities: a) to enforce any building codes, ordinances or laws regulating or requiring the construction, reconstruction, maintenance, replacement, repair, placement or demolition of any "building structure", other structure or land at the "residence premises."²

Plaintiffs had the option to purchase coverage "to comply with local building codes after covered loss to the 'dwelling' or when repair or replacement results in increased cost due to the enforcement of any building codes, ordinances or laws regulating or requiring the construction, reconstruction, maintenance, replacement, repair, placement or demolition of the 'dwelling.' " They declined to purchase this optional coverage.

Under the section for additional living expenses, the Policy provides for the payment of the reasonable increase in living expense resulting from a loss under Dwelling Protection coverage that makes the residence uninhabitable. Payment for additional living expenses under this section of the Policy is limited to, at most, 12 months after the covered loss.

Plaintiffs experienced a covered loss when their residence was damaged in an accidental fire. To date, Defendant has paid Plaintiffs $89,054.22 under Coverage A-Dwelling Protection, $28,793.49 under Coverage C-Personal Property Protection, and $26,702.11 for Additional Living Expenses. Defendant has denied coverage for a portion of the costs Plaintiffs claim because it believes the estimates Plaintiffs submitted include the increased cost to comply with building codes.

The estimates at issue were prepared by Caid Riggins. Riggins estimate was the result of "damage observed, consequential loss resulting from the proper repair process and strict compliance with applicable codes statutes and laws." The parties agree that Plaintiffs' residence in Sherman County was not subject to any building codes. The estimate did include additional cost to replace four-inch exterior walls and insulation with six-inch framing and insulation, purportedly to comply with the International Energy Conservation Code ("IECC"). Riggins admitted that he did not know whether Sherman County had adopted the IECC.

Plaintiffs filed the instant civil case against Defendant in the District Court of Sherman County, Kansas on March 5, 2021. Defendant removed the case to this Court on May 3, 2021. Prior to any litigation, Plaintiff Brandon Terry filed for Chapter 13 bankruptcy on June 10, 2020. In the bankruptcy court's order modifying and confirming Chapter 13 plan, the court required Brandon to "timely report to the Trustee any events affecting disposable income which are not projected on Schedules I and J, including, but not limited to, tax refunds, inheritances, prizes, lawsuits, gifts, etc., that are received or receivable during the pendency of the case."

After filing this lawsuit, Brandon's bankruptcy attorney notified the Chapter 13 Trustee in Brandon's case of this lawsuit on May 27, 2021. The Trustee acknowledged this notification the same day and thereafter entered his appearance in the instant case to monitor the matter.

II. Legal Standard

Summary judgment is appropriate if the moving party demonstrates that there is no genuine issue as to any material fact and they are entitled to judgment as a matter of law.³ A fact is "material" when it is essential to the claim, and issues of fact are "genuine" if the proffered evidence permits a reasonable jury to decide the issue in either party's favor.⁴ The movant bears the initial burden of proof, though "a movant that will not bear the burden of persuasion at trial need not negate the nonmovant's claim."⁵ "Such a movant may make its prima facie demonstration simply by pointing out to the court a lack of evidence for the nonmovant on an essential element of the nonmovant's claim."⁶ The nonmovant must then bring forth "specific facts showing a genuine issue for trial."⁷ These facts must be clearly identified through affidavits, deposition transcripts, or incorporated exhibits—conclusory allegations alone cannot survive a motion for summary judgment.⁸ The court views all evidence and draws "reasonable inferences therefrom in the light most favorable to the nonmoving party."⁹

The Court applies this same standard to cross motions for summary judgment. Each party bears the burden of establishing that no genuine issue of material fact exists and entitlement to judgment as a matter of law.¹⁰ "Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another."¹¹ But where the cross motions overlap, the Court may permissibly address the legal arguments together.¹² Each motion is viewed in the light most favorable to its nonmoving party.¹³

III. Analysis

A. Policy Exclusion for Building Code Coverage.

Both Plaintiffs and Defendant seek partial summary judgment related to the following exclusion under Plaintiffs' policy:

Under Dwelling Protection-Coverage A and Other Structures Protection-Coverage B of this policy, "we" do not cover any loss which consists of, is caused by, or would not have occurred but for, one or more of the following excluded events, perils or conditions. Such loss is excluded regardless of: a) the cause or source of the excluded event, peril or condition; b) any other causes contributing concurrently or in any sequence with the excluded event, peril or condition to produce the loss; or c) whether the excluded event, peril or condition involves isolated or widespread damage, arises from natural, man-made or other forces, or arises as a result of any combination of these forces.

Actions taken by civil, governmental or military authorities:a) to enforce any building codes, ordinances or laws regulating or requiring the construction, reconstruction, maintenance, replacement, repair, placement or demolition of any "building structure", other structure or land at the "residence premises."

Terms and limitations in an insurance policy are generally enforceable according to their plain meaning unless they violate public policy or conflict with statutory requirements.¹⁴

The interpretation and legal effect of an insurance contract is a question of law to be determined by the Court.¹⁵

Plaintiffs ask the Court to conclude that this exclusion is void as against public policy under Kansas law. In the alternative, Plaintiffs contend that this exclusion is inapplicable to their situation as no building codes govern their residence. Defendant, naturally, urges the opposite conclusions.

1. The exclusion is void as contrary to public policy under Kansas law.

Plaintiff relies on the Kansas Court of Appeals decision in Unified School District No. 285 v. St. Paul Fire and Marine Insurance Co.¹⁶ for the proposition that the above exclusion is void and unenforceable under Kansas law. In USD No. 285, ...