In the United States District Court for the District of Kansas
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS KELLY L. ASHTON and WILLIAM A. HELTON, Plaintiffs, vs. Case No. 11-4002-SAC NATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, Defendant. MEMORANDUM AND ORDER The case comes before the court on the parties’ cross-motions for summary judgment. (Dk. 44 and 46). Kelly Ashton and William Helton, sued in state court for their serious injuries sustained in a car accident with a 1988 Chevrolet Camaro driven by the fifteen-year-old Jacob Valek but owned by Jacob’s father, William Valek. In 2009, the state district court in Republic County, Kansas, entered a judgment for William Helton against William Valek for $306,252.69 and a judgment for Kelly Ashton and against William Valek for $2,283,655.14. Farm Bureau Insurance issued a policy to William Valek on the 1988 Chevrolet Camaro with policy limits of $100,000 per person and $300,000 per occurrence, and it defended this lawsuit. Prior to the state district court judgments, Kelly Ashton and William Helton reached an agreement with William Valek and the Estate of Jacob Valek (“Valeks”) resulting in an assignment of rights and covenant-not-to-sue. William Valek assigned his rights and causes of action for coverage against National Farmers Union Property and Casualty Company (“NFU”) under insurance policies issued to him. Kelly Ashton and William Helton (“the plaintiffs”) bring this bad faith insurance claim assigned to them seeking payment of an excess judgment against the defendant NFU for its denial of coverage on two insurance policies issued to William Valek. The plaintiffs ask for oral argument on their motion for summary judgment pursuant to D. Kan. Rule 7.2. The plaintiffs acknowledge “[t]his is not a complicated case,” and they give the court no reasons for how oral argument would assist the court in its decision. The court denies the request for oral argument. Rule 56 authorizes judgment without trial Aif the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.@ Fed. R. Civ. P. 56(c)(2). Substantive law governs the elements of a given claim or defense and reveals what issues are to be determined and what facts are material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A material fact is one which would affect the outcome of the claim or defense under the governing law. Id. A[T]he dispute about a material fact is >genuine,= . ., if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.@ Id. 2 On summary judgment, the initial burden is with the movant to point out the portions of the record which show that the movant is entitled to judgment as a matter of law. Thomas v. Wichita CocaBCola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992), cert. denied, 506 U.S. 1013 (1992). Instead of disproving a claim or defense, the movant need only show "a lack of evidence" on an essential element. Adler v. WalBMart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998). If the movant meets that burden, the non-movant must come forward with specific facts based on admissible evidence from which a rational fact finder could find in the non-movant's favor. Id. The non-movant=s Aburden to respond arises only if the@ movant meets its initial burden of production. Neal v. Lewis, 414 F.3d 1244, 1248 (10th Cir. 2005) (citation omitted). The essential inquiry is Awhether the evidence presents a sufficient disagreement to require submission to the jury or whether the evidence is so one-sided that one party must prevail as a matter of law.@ Anderson v. Liberty Lobby, 477 U.S. at 251B52. Put another way, A[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no >genuine issue for trial.=@ Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); See Pinkerton v. Colorado Dept. of Transp., 563 F.3d 1052, 1058 (10th Cir. 2009). 3 STATEMENT OF FACTS Just after midnight on August 11, 2007, the plaintiffs were driving south on US-81 when an 1988 Chevrolet Camaro eastbound on Fir Road failed to stop at the intersection and crashed into the passenger side of their vehicle. The Camaro’s driver was Jacob Valek, a fifteen-year-old who had a limited use farm permit for driving. Jacob had a blood alcohol level of .02 which is an unlawful level under Kansas law for a person his age. From this violent collision, Jacob Valek was killed, Kelly Ashton was rendered a paraplegic, and William Helton was seriously injured. The Camaro involved in the accident was owned and registered to William Valek. His son, Jacob, had obtained the limited use driving farm permit because of his work on the family farm. Earlier that evening, when asked, William had given his son, Jacob, permission to drive the Camaro to town to visit friends. Driving on a highway under these circumstances did not come within the lawful operating authority of Jacob’s limited use farm permit. William Valek had insured the Camaro and his other personal or family vehicles with Farm Bureau. He separately insured his farm business vehicles and his farm operations with NFU. After the accident, Farm Bureau paid the policy limits to the plaintiffs, and NFU denied coverage under its policies. 4 NFU issued an automobile policy [No. 1PA0016598] to William Valek and his brother, Mickey J. Valek. The vehicles identified in this auto policy were used for farming operations. The Camaro is not named on this policy. NFU also issued a farm policy [No. 1FO0008116] to Marcella Valek & Sons. Both policies were in effect on August 11, 2007. In January of 2009, William Helton filed suit against the estate of Jacob Valek in state district court, and Kelly Ashton filed her suit against the estate in February of 2009. After taking the depositions of William and Teresa Valek, the plaintiffs amended their state court petitions adding William Valek as a party defendant. The petitions alleged in relevant part: Defendant Bill Valek knowingly (1) permitted Jake Valek, a minor under the age of sixteen years, to drive Bill Valek’s Camero upon a highway; (2) permitted his son, Jake Valek, who was under the age of eighteen years to drive a motor vehicle upon a highway when his son was not authorized under the Kansas Driver’s License Act; and (3) knowingly permitted a motor vehicle owned by him to be driven upon any highway by Jake Valek, who was not authorized under the Kansas Driver’s License Act. Defendant Bill Valek is therefore jointly and severally liable with Jake Valek for any damages caused by the negligence of Jake Valek in driving said vehicle. Defendant Bill Valek is additionally negligent for negligently entrusting his Camero to Jake Valek. (Dk. 47, Ex. J, ¶ 9). Counsel for the plaintiffs sent a letter dated July 24, 2009, to NFU citing both policy numbers and making the following demand: Please find enclosed with this letter documents in support of my demand for your policy limits of $300,000.00 per person, $600,000.00 per accident. Your insured, Bill Valek, has been deposed and 5 acknowledged that he negligently entrusted his automobile to his son, Jacob Valek, on August 11, 2007. The injuries to the three individuals in this case far exceed $4.5 million. We are giving you 30 days to tender your $600,000.00 limits in full and final release of Bill Valek. (Dk. 45, Att. 8). While plainly characterizing his demand as being for “your [NFU] policy limits,” the plaintiffs’ letter erroneously stated the policy limits. NFU had not issued any policy to William Valek with policy limits of $300,000.00 per person and $600,000.00 per accident. On August 14, 2009, the NFU senior claim representative Jan LeDoux sent a letter addressed to the insured Valek denying coverage under both policy. The letter summarizes the investigation leading to the denial of coverage: Our investigation included reviewing the facts of the accident via information provided by Mr. Leatherman, discussions with your Farmers Union agent, discussions with our Underwriting department, discussions with Farm Bureau Insurance and a complete review of the applicable personal automobile and farm policy with referenced above. (Dk. 47, Ex. L). Jan LeDoux’s notes reflect that she spoke about the claim with Larry Bork, the attorney retained by State Farm to represent the estate of Jacob Valek. (Dk. 45, Att. 10). Randall West, a Claims Program Manager with NFU, reviewed Ms. LeDoux’s investigative findings and approved her recommendation to deny coverage. Ms. LeDoux’s letter states specific reasons for NFU’s denial of coverage under both policies. After quoting the definition of “insured car” 6 found in the auto policy, the letter concludes that: “Because the Camaro was never added to the above referenced policy, it does not qualify as an ‘insured car’ and therefore incidents arising out of its use would not be covered.” Id. The letter next quotes from the farm policy the exclusion for “bodily injury” arising out of “use or entrustment” of any motor vehicle and concludes: “Use of motor vehicles and entrustment of a motor vehicle is excluded under the farm policy. Therefore, the farm policy would also not provide coverage of the above referenced incident.” Id.