101 F. Supp. 3d 1046
D. Kan.2015Background
- Magnus, Inc. sues Diamond State Insurance for coverage and defense of claims Magnus asserted against PDP in Kansas state court.
- PDP manufactured arrow broadhead adapters and used aluminum grade; parties disputed whether contract required 7075/6061 or only 2011 grade.
- Adapters were permanently glued to broadheads, enabling interchangeability yet creating seizing problems for arrows.
- Magnus raised seizing concerns in Sept. 2002 and again in Mar. 2004, while PDP continued using 2011 aluminum.
- PDP last invoiced Magnus in 2005; Magnus filed suit in 2008; Regier quantified lost earnings; PDP notified Diamond to defend in 2009 and Diamond denied.
- Consent judgment entered in June 2010 for $284,519.75, which PDP assigned to Magnus, establishing damages for lost earnings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there was an occurrence | Magnus argues acts were accidental under pre- or post-2008 tests. | Diamond contends no occurrence because PDP’s act was intentional and not accident. | Genuine fact issues exist; not decided as a matter of law. |
| Whether damages are property damage | Magnus contends lost profits due to damage to arrows constitute property damage. | Diamond argues lost profits are intangible damages not covered as property damage. | Not decided; facts and law require further briefing and analysis. |
| Contractual liability exclusion | Magnus asserts exclusion does not apply because claim arises from defective performance, not contractually assumed liability. | Diamond contends exclusion applies if damages originate from contract or agreement. | Partial summary judgment for Magnus on this exclusion; it does not apply. |
| Damage to property exclusion (and related exclusions) | Magnus argues these exclusions do not bar coverage given Arrows' damage and third-party property impact. | Diamond argues exclusions bar coverage for property damage to PDP’s product or work. | Magnes is entitled to partial summary judgment on multiple exclusions; some exclusions do not apply. |
| Recall of products, work or impaired property exclusion | Magnus asserts recall exclusion does not apply to the consent-judgment damages. | Diamond argues damages stem from recall-related costs and should be excluded. | Court overruled Diamond; exclusion does not apply; Magnus partially successful. |
Key Cases Cited
- Maryland Cas. Co. v. Mike Miller Cos., Inc., 715 F. Supp. 321 (D. Kan. 1989) (establishes occurrence concept in Kansas law under Maryland approach)
- Park Univ. Enters, v. Am. Cas. Co. of Reading, PA, 442 F.3d 1239 (10th Cir. 2006) (death of natural and probable consequences test; pre-substantial certainty era)
- Thomas v. Benchmark Ins. Co., 285 Kan. 918, 179 P.3d 421 (Kan. 2008) (adopts substantial certainty test for intentional injury)
- Hamilton Die Cast, Inc. v. U.S. Fid. & Guar. Co., 508 F.2d 417 (7th Cir. 1975) (damages to business reputation not covered when only tangible property damaged)
- Dreis & Krump Manufacturing Co. v. Phoenix Insurance Co., 548 F.2d 681 (7th Cir. 1977) (consequential damages require tangible property damage under some policy language)
- Crist v. Hunan Palace, Inc., 277 Kan. 706, 89 P.3d 573 (Kan. 2004) (garnishment collateral estoppel; insurer bound by insured’s defense in underlying case)