250 F. Supp. 3d 825
D. Kan.2017Background
- Liberty Mutual issued a workers’ compensation/employer liability policy to Clemens Coal effective Nov. 1, 1996–Nov. 1, 1997, but it was cancelled Aug. 1, 1997 for nonpayment. The Policy lacked the Federal Coal Mine Health & Safety Act (black lung) endorsement.
- Clayton Spencer filed a black lung benefits claim with the DOL for disease allegedly contracted while working for Clemens Coal; Liberty Mutual sought a declaratory judgment that the Policy does not cover that claim.
- Clemens Coal went bankrupt; its former president Dennis Woolman remained as defendant and asserted a negligence counterclaim and an equitable/promissory estoppel defense to coverage denial.
- Agents/brokers (Worley, Smith, IMA representatives) negotiated the Liberty Mutual policy; Liberty Mutual’s agent did not affirmatively promise black lung coverage and testified she was unaware of that specific endorsement.
- Clemens Coal (through prior correspondence from Hartford and its broker Srajer) had notice that black lung coverage required a specific endorsement and that the Liberty Mutual policy’s lower premium suggested different coverage; neither Woolman nor his procuring agent read the Policy before issuance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Does the Policy as written cover the Spencer black lung claim? | Liberty Mutual: The Policy unambiguously excludes federal occupational-disease/black lung claims (no endorsement purchased). | Woolman: Contends formation/communications warrant coverage or prevent denial. | Held: Policy language is unambiguous and does not cover the claim; judgment for Liberty Mutual. |
| 2) Can Woolman invoke equitable/promissory estoppel to expand coverage? | Liberty Mutual: Estoppel cannot be used to expand coverage beyond policy terms and no affirmative misrepresentation occurred. | Woolman: Liberty Mutual’s pre- and post-issuance conduct (and agent silence) justify estoppel/reliance. | Held: Estoppel inapplicable—no affirmative representations, policy explicitly excludes coverage, and Heinson is distinguishable. |
| 3) Was any reliance by Woolman reasonable such that estoppel could apply? | Liberty Mutual: Woolman had a duty to read the policy; he had notice that endorsement was required and did not reasonably rely on silence. | Woolman: Relied on agent/broker when procuring coverage and could assume policy matched prior coverage. | Held: Reliance was unreasonable/unreasonable as a matter of law; insureds have duty to read policy absent fraud. |
| 4) Does 20 C.F.R. § 726.204 require reformation or imply black lung coverage into the Policy? | Liberty Mutual: Federal regulation imposes obligation on operator to secure coverage, not on insurer to issue every policy with that coverage. | Woolman: Policy was ‘‘obtained to comply’’ and regulation mandates inclusion or construction to include black lung coverage. | Held: Regulation places duty on operator, not insurer; it does not reform or add coverage to this policy. |
Key Cases Cited
- Davis v. Allstate Ins. Co., 36 Kan. App. 2d 717, 143 P.3d 413 (2006) (interpretation of insurance policy is a legal question for the court)
- Steinle v. Knowles, 265 Kan. 545, 961 P.2d 1228 (1998) (clear contract language controls; no construction when terms are plain)
- Heinson v. Porter, 244 Kan. 667, 772 P.2d 778 (1989) (estoppel can overcome policy terms in narrow circumstances involving affirmative representations and no explicit exclusion)
- Russell v. Farmers Ins. Co., Inc., 38 Kan. App. 2d 290, 163 P.3d 1266 (2007) (distinguishes conditions that may be waived from exclusions that cannot be expanded by estoppel)
- Gillespie v. Seymour, 250 Kan. 123, 823 P.2d 782 (1991) (elements of equitable estoppel: misrepresentation and detrimental reliance)
- Chism v. Protective Life Ins. Co., 290 Kan. 645, 234 P.3d 780 (2010) (insured’s duty to understand written application/policy; exceptions for fraud, undue influence, mutual mistake)
- Marshall v. Kan. Med. Mut. Ins. Co., 276 Kan. 97, 73 P.3d 120 (2003) (party has duty to learn contract contents; failure to read estops avoidance)
- McNally v. State Farm Fire & Cas. Co., 446 F. Supp. 2d 1192 (D. Kan. 2006) (insured’s ignorance of unambiguous policy terms insufficient to avoid summary judgment)
- Stewart v. Commonwealth Cas. Co. of Philadelphia, Pa., 137 Kan. 919, 22 P.2d 435 (1933) (exception where agent knowingly made false representations to induce sale)
- Cosgrove v. Young, 230 Kan. 706, 642 P.2d 75 (1982) (estoppel principles discussed)