Kansas Masonic Foundation, Inc v. Auto-Owners Insurance Company, 5:24-cv-04029

Plaintiff Kansas Masonic Foundation, Inc. discovered in September 2022 that an employee had embezzled $554,491.14 over several years.
Plaintiff held a sequence of business insurance policies from Cincinnati Insurance Co., New Hampshire Insurance Co., and Auto-Owners Insurance Company; each contained commercial crime coverage.
Plaintiff submitted claims to its insurers for losses due to employee theft; Auto-Owners paid for only certain losses occurring during its policy periods but denied further recovery for losses from periods covered by earlier insurers.
Plaintiff sought declaratory judgment that Auto-Owners was obligated under its “prior loss” provision to cover all theft losses between August 28, 2015, and March 17, 2020, previously covered by now-expired policies from other insurers.
Both parties filed cross-motions for summary judgment with the principal dispute centering on interpretation of the “prior loss” policy language.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Scope of "prior loss" provision	Can recover for losses under all prior insurance policies, so long as coverage was continuous and no gaps occurred.	Only liable for losses sustained during the policy period of the insurance immediately preceding the Auto-Owners policy.	Coverage only for losses under immediately preceding policy; Plaintiff cannot recover.
Ambiguity of policy language	Language is ambiguous; should be construed in Plaintiff’s favor as insured.	Language is clear and unambiguous; should be interpreted as written.	Language not ambiguous; plain text interpretation applies.
Recovery under earlier Auto-Owners policies	Losses should be recoverable under Auto-Owners Policy 1 or 2 via prior loss provisions.	Losses not covered because those policies expired more than a year before discovery, or losses occurred before relevant policy periods.	Not recoverable; discovery period and policy period limits bar recovery.
Entitlement to attorneys' fees under K.S.A. § 40-256	Defendant's refusal to pay was without just cause or excuse; thus, fees are due.	No judgment rendered against defendant; no entitlement to fees.	Attorneys’ fees not awarded because Defendant prevailed.

O’Bryan v. Columbia Ins. Grp., 56 P.3d 789 (Kan. 2002) (clarifies that insurance contracts are interpreted by their plain meaning if unambiguous)
Brumley v. Lee, 963 P.2d 1224 (Kan. 1998) (ambiguous insurance policies are construed in favor of the insured)
Catholic Diocese of Dodge City v. Raymer, 840 P.2d 456 (Kan. 1992) (ambiguity exists only if contract’s language can reasonably be interpreted in more than one way)
Cent. Sec. Mut. Ins. v. DePinto, 681 P.2d 15 (Kan. 1984) (courts should not create ambiguity where none exists)