430 S.W.3d 248
Ky. Ct. App.2014Background
- Neighborhood leased the house at 408 N. 42nd Street, Louisville, to McCormick.
- McCormick was arrested for manufacturing methamphetamine in the house and the byproducts rendered the house uninhabitable.
- Authorities prohibited re-leasing the premises until decontamination was completed.
- Neighborhood sued Farm Bureau for a ruling that its insurance policy covers decontamination expenses; Farm Bureau denied coverage citing a criminal acts exclusion.
- Circuit court granted summary judgment for Farm Bureau; Neighborhood appeals with the issue framed as whether McCormick qualifies as someone entrusted with the property.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the 'criminal acts exclusion' apply when a tenant commits a crime on leased property? | Neighborhood contends McCormick is not 'entrusted' with the property under the lease. | Farm Bureau argues that the exclusion applies if the loss is caused by a criminal act by anyone entrusted with the property. | Yes; exclusion applies if the actor was entrusted with the property. |
| Whether the lease relationship can be treated as entrusting the property to the tenant for purposes of the exclusion? | Lease is not entrustment; a lessee does not become entrusted with the property. | Entrustment encompasses a bailment-type transfer of possession under a lease; the lessee is entrusted with the property. | Entrustment includes the lessee; Neighborhood entrusted the house to McCormick. |
| Whether the doctrine of ejusdem generis or reasonable expectations applies to interpret 'anyone' and 'entrust' in this policy? | Doctrines limit scope; want narrower reading of 'anyone' and 'entrust'. | Exclusion language is clear; these doctrines do not apply where ambiguity does not exist. | Both arguments fail; exclusion is unambiguous and applicable; doctrines do not alter. |
Key Cases Cited
- Imperial Ins. Co. v. Ellington, 498 S.W.2d 368 (Tex.Civ.App.1973) (entrusted conveys delivery with confidence regarding care and use of the property)
- Vision Financial Group, Inc. v. Midwest Family Mut. Ins. Co., 355 F.3d 640 (7th Cir.2004) (entrusted encompasses a lessee-lessor relationship)
- Healthwise of Kentucky, Ltd. v. Anglin, 956 S.W.2d 213 (Ky.1997) (doctrines like ejusdem generis unavailable where policy language unambiguous)
- Scifres v. Kraft, 916 S.W.2d 779 (Ky. App.1996) (de novo review; contract interpretation is a question of law)
- Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378 (Ky.1992) (summary judgment standard and deference not given to circuit court in legal questions)
- City of Lexington v. Edgerton, 159 S.W.2d 1015 (Ky.1941) (ejusdem generis doctrine limitations in statutory/contract interpretation)
- Cumberland Valley Contrs., Inc. v. Bell County Coal Carp., 238 S.W.3d 644 (Ky.2007) (contractual interpretation is de novo on appeal)