Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-03097/USCOURTS-ca10-89-03097-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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... 

PlL -tf~ . Ev 

United St~ftf Coore Qf Appto.ls 

Tenth Cir~uit 

·· -- - UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

APR 2 5 1990 

.ROBERT L. HOECKER 

Clerk 

UNIFIED SCHOOL DISTRICT #501, Shawnee 

County, State of Kansas, 

Plaintiff-Appellant, 

v. 

CONTINENTAL CASUALTY COMPANY, 

Defendant-Appellee. 

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ORDER AND JUDGMENT* 

No. 89-3097 

(D.C. No. 1083-5) 

(Dist. of Kansas) 

Before BRORBY and BARRETT, Circuit Judges, and WEST*, District 

Judge. 

The Honorable Lee R. West, United States District Judge for the 

District of Western Oklahoma, sitting by designation. 

Unified School District No. 501, Shawnee County, Kansas 

(School District)), the insured, seeks a declaratory judgment that 

Continental Casualty Company (Continental), the insurer, has a 

duty to reimburse the School District for the losses incurred 

defending against specific claims made in 1979 by the Intervenors 

in Brown v. Board of Education, Case No. T-316 (Brown). This 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of th~ case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. · 

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 1 
,. 

. all-eged duty. i-s--predicated upon the -contract of insurance entered 

into between the parties (Policy). The parties filed crossmotions for summary judgment and on March 29, 1989, the district 

court entered judgment in favor of Continental. 

In granting Continental's motion for summary judgment, the 

district court concluded that Endorsement No. 3 to the Policy was 

unambiguous and excluded coverage for losses sustained as a 

consequence of the Intervenors' action. 

provides as follows: 

Endorsement No. 3 

COVERAGE SHALL EXCLUDE ANY LOSS ARISING OUT OF PRIOR OR 

OUTSTANDING LITIGATION OR ACTS WHICH GAVE RISE THERETO. 

(R., Vol. 1, Doc. 1 Ex. 1, Insurance Policy) 

original). 

(Emphasis in 

The district court concluded that the Intervenors' action 

"arose out" of the Brown lawsuit which was outstanding litigation 

at the time the motion to intervene was filed. Thus, Endorsement 

No. 3 precluded coverage under the Policy. 

FACTS 

On February 28, 1951, Oliver Brown brought a class action on 

behalf of all black children attending elementary schools in the 

Topeka School district. In the 1951 complaint, the Brown 

plaintiffs alleged that the opportunities provided to children 

attending all black schools were inferior to those provided to 

children attending all white schools, including the physical 

facilities, curricula, teaching resources, and student personnel 

services, as well as other services. In addition to these 

factors, they alleged that segregation itself resulted in an 

inferior education for blacks and thus violated the Fourteenth 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 2 
'{ 

--Amendment to -- the United States Cons ti tut ion. The Brown plaintiffs 

sought a permanent injunction restraining the enforcement, 

operation and execution of a state statute that provided for 

segregation of schools for the education of black children and 

white children below the high school level. Further, these 

plaintiffs sought a declaratory judgment declaring 

unconstitutional the state statute and the segregation scheme set 

up thereunder by the school authorities of the City of Topeka. 

The district court held for the defendants finding that the 

doctrine of "separate but equal" in the school systems did not 

violate the constitutional guarantees of due process of law. 

That court further found that the physical facilities, the 

curricula, the courses of study, and the qualifications and 

quality of teachers, as well as other educational facilities in 

the two sets of schools, were comparable. Brown v. Board of 

Education, 98 F. Supp. 797 (D. Kan. 1951). 

On May 17, 1954, the United States Supreme Court reversed the 

district court. In finding for the plaintiffs, the Supreme Court 

held that "in the field of public education the doctrine of 

'separate but equal' has no 

facilities are inherently unequal." 

347 U.S. 483, 495 (1954) (Brown I). 

place. Separate 

Brown v. Board of 

educational 

Education, 

In Brown I, the Court invited the parties to submit briefs on 

the question of the appropriate remedy for the constitutional 

violation. In Brown v. Board of Education, 349 U.S. 294 (1955) 

(Brown II), the Court concluded that the local federal district 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 3 
·- . court -should monitor the School District's actions in implementing 

the constitutional principles set forth in Brown I. 

On remand, the district court held a full hearing to 

determine whether the School District's plan for desegregation 

complied with the Supreme Court's mandate. On October 28, 1955, 

the district court entered an order finding that the plans 

submitted by the School District constituted a good faith 

beginning towards compliance with the Supreme Court's order. The 

district court stated as follows: 

There are a number of respects in which we feel that the 

plan does not constitute full compliance with the 

mandate of the Supreme Court, but that mandate implies 

that some time will be required to bring that about. 

The elements that we feel do not constitute full 

compliance are mostly of a minor nature but since this 

is not a final decree no useful purpose would be served 

by setting them out herein. 

*** 

It is the conclusion of the court that while complete 

desegregation has not been accomplished in the Topeka 

School System, a good faith effort toward that end has 

been made and that, therefore, the plan adopted by the 

Board of Education of the City of Topeka be approved as 

a good faith beginning to bring about complete 

desegregation. Jurisdiction of the cause for the 

purpose of entering the final decree is retained until 

such time as the Court feels there has been full 

compliance with the mandate of the Supreme Court. 

Brown v. Board of Education, 139 F. Supp. 468, 468-469 (D. Kan. 

1955). 

On August 22, 1979, the Intervenors filed their "Motion For 

An Order Commanding Compliance With The Supreme Court Mandate To 

Desegregate The Schools In The Case of Brown v. Board of Education 

of Topeka, 349 U.S. 294." The Intervenors presented their motion 

as follows: 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 4 
Come now -the - intervening plaintiffs and move the 

Court to issue an order commanding Unified School 

District #501 of Topeka, Kansas to desegregate the 

schools operated by said school district and establish a 

racially integrated and unitary school system as ordered 

by the United States Supreme Court in Brown v. Board of 

Education of Topeka, supra. (Emphasis added). 

In support 

plaintiffs state: 

of this Motion, the intervening 

1. That they are Black Americans who reside in 

Topeka, Kansas. 

2. That the adult plaintiffs are parents of the 

minor children plaintiffs who attend public schools 

within Unified School District #501 of Topeka, Kansas. 

3. That United School District #501 is the 

successor to the Board of Education of Topeka, Shawnee 

County, Kansas, defendant in Brown v. Board of Education 

of Topeka. 

4 Defendant school district is required by the law 

of the State of Kansas to maintain and operate a system 

of public schools in Unified School district #501 in 

Shawnee County, Kansas and defendant school district is 

presently operating such public schools in said county 

and State. 

5. The the United States Supreme Court in Brown v. 

Board of Education of Topeka, supra ordered the Board of 

Education of Topeka to adopt and implement a plan to 

desegregate the schools operated by said Board of 

Education and establish a unitary and integrated school 

system "with all deliberate speed." 

6. The United State Supreme court in Brown further 

ordered that the United States District Court for the 

District of Kansas retain jurisdiction over the Brown 

case until the Board of Education of Topeka achieved 

full compliance with its mandate. (Emphasis added). 

7. That notwithstanding the Supreme court's 

mandate, the former Board of Education of Topeka and the 

current Unified School district #501 have both failed to 

desegregate the schools and establish a unitary and 

integrated school system. (Emphasis added). 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 5 
(R., Vol. I, Doc. 1, Ex. 3, Motion - for an Order Commanding 

Compliance With the Supreme Court Mandate to Desegregate the 

Schools in the Case of Brown v. Board of Education of Topeka). 

The motion to intervene was granted on November 29, 1979, and 

the Brown lawsuit subsequently proceeded to trial. On April 9, 

1987, the district court entered a final judgment finding that the 

School District had fully complied with the Supreme Court's 

mandate in Brown I and Brown II. Brown v. Board of Education, 671 

F. Supp. 1290 (D. Kan. 1987). On January 29, 1990, this court 

reversed in part the 1987 order and held that the School District 

did not meet its burden of establishing a lack of causal 

connection between the current conditions of segregation and the 

prior de jure system. Further, this court held that the Topeka 

school system was not unitary under constitutional standards and 

was therefore in violation of Title VI of the 1964 Civil Rights 

Act. Brown v. Board of Education, 892 F.2d, 851 (10th Cir. 1990) 

(Baldock, Circuit Judge, dissenting). 

At issue in this action is the insurance agreement entered 

into between Continental and the School District with an effective 

policy period from October 15, 1976, to October 15, 1979. This 

Policy was thereafter renewed and continued in effect from October 

15, 1979, until on or about October 18, 1984, when Continental 

canceled the policy. 

This Policy is a "reimbursement policy" wherein Continental 

agreed that if a claim was brought against the School District for 

a "wrongful act" occurring during the Policy period then, provided 

that no exclusions were applicable, Continental would pay the 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 6 
.. School " District for any "losses"- which the School District became 

legally obligated to pay. Wrongful Act is defined in Section 

III(c) of the Policy to include, among other things, any "act or 

omission or neglect or breach of duty by the Assureds in the 

discharge of their duties." (R., Vol. I, Doc. 1, Ex. 1, Insurance 

Policy). Loss is defined in Section III(d) of the Policy and 

encompasses any amount which the School district is "legally 

obligated to pay" including damages, judgments, and "cost of 

investigation and defense of legal actions. II Id. 

Also included in the Policy is a Prior Wrongful Act 

Endorsement, which states as follows: 

The coverage afforded by this endorsement shall not 

apply to any claim, suit, action or proceeding pending 

at the effective date of this endorsement or to any 

Wrongful Act if, at the inception date of this 

endorsement, the School District or an Assured could 

reasonably have expected that a claim, suit, action or 

proceeding would result therefrom. 

Id. As stated before, the Policy also provided that: 

Id. 

COVERAGE SHALL EXCLUDE ANY LOSS ARISING OUT OF PRIOR OR 

OUTSTANDING LITIGATION OR ACTS WHICH GAVE RISE THERETO. 

By letter dated December 6, 1979, the School District 

notified Continental of the 1979 claims made against it by the 

intervening plaintiffs. Continental then notified the School 

District on May 16, 1980, that it was denying any liability in 

connection with the 1979 Brown claims made against the School 

District, and denied that the Policy afforded any coverage to the 

School District in connection with the claims of the Intervenors. 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 7 
Continental denied coverage based- upon Endorsements No. 2 and No. 

3 of the Policy. 

A second amended complaint was filed by the Intervenors on 

May 27, 1986. This complaint added a new claim for relief 

pursuant to Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 

2000d. Continental still refused to pay the School District for 

the losses incurred in defending against the Intervenors in Brown. 

On March 23, 1989, the district court granted Continental's 

motion for summary judgment and denied the School District's 

summary judgment motion. In holding for Continental, the district 

court concluded that Endorsement No. 3 was not ambiguous and that, 

therefore, the words would have to be applied according to their 

plain, ordinary and popular sense. Because that Endorsement 

specifically excluded from coverage any loss arising out of 

outstanding litigation, the School District's motion was denied. 

The district court held that the intervening plaintiffs' case was 

simply a continuation of the Brown case. "In fact, the 

intervening plaintiffs' case ultimately determined whether Topeka 

had finally complied with the original mandate resulting from the 

earlier litigation in this case." (R., Vol. I, Doc. 48, 

Memorandum and Order at p. 6). Thus, the intervening plaintiffs' 

case ended the ongoing Brown litigation. Id. 

The School District is now appealing the district court's 

order concerning Continental's liability to the School District 

under the Policy. 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 8 
ISSUES 

The School District posits the following issues for review: 

I. Whether the district court erred in denying plaintiff 

School District's motion for partial summary judgment. 

A. Whether the district court erred in determining that 

the exclusionary clause was unambiguous. 

B. Whether the district court erred in failing to 

construe the exclusionary clause narrowly. 

c. Whether the ''loss" suffered by the School District 

as a result of the claims made against it in 1979 arose out of 

prior or outstanding litigation. 

D. Whether the district court erred in failing to 

consider prior actions of the defendant. 

II. Whether the district court erred in granting defendant's 

motion for summary judgment. 

DISCUSSION 

I 

A. 

The School District argues that because Endorsement No. 3 is 

susceptible of more than one meaning, it is ambiguous and must be 

construed against Continental, the insurer. According to the 

School District, Endorsement No. 3 is ambiguous because: (l} the 

phrase ''arising out of" is ambiguous; (2) the phrase "prior or 

outstanding litigation" is ambiguous; and (3) the differences 

between the clause ''acts which gave rise thereto" and the previous 

clause ''prior or outstanding litigation" is unclear. 

Continental argues that the foregoing Endorsements are not 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 9 
ambiguous -and should be enforced according to their plain, 

ordinary and popular meaning. Further, since the Policy is clear 

and unambiguous there is no need for judicial interpretation or 

the application of rules of liberal construction; the court's 

function is to enforce the contract according to its terms. 

The general rule concerning ambiguities in insurance 

contracts is that if the terms of a policy are ambiguous, 

uncertain, conflicting or susceptible to more than one 

construction, the policy should be construed most favorably to the 

insured. Wing Mah v. United States Fire Insurance Company, 545 

P.2d 366 (Kan. 1976). "If, however, the contract is clear and 

unambiguous, the words are to be taken and understood in their 

plain, ordinary and popular sense, and there is no need for 

judicial interpretation or the application of rules of liberal 

construction. II Goforth v. Franklin Life Insurance Company, 

449 P.2d 477, 481 (Kan. 1969). 

Wing 

'When an insurance contract is not ambiguous, the 

court may not make another contract for the parties. 

Its function is to enforce the contract as made .•.. 

To be ambiguous the contract must contain provisions or 

language of doubtful or conflicting meaning, as gleaned 

from a natural and reasonable interpretation of its 

language. Ambiguity in a written contract does 

not appear until the application of pertinent rules of 

interpretation to the face of the instrument leaves it 

genuinely uncertain which one of two or more meanings is 

the proper meaning.' 

Mah, 545 P.2d at 369 (quoting Clark v. Prudential Ins. Co., 

464 P. 2d 253, 256 (Kan. 1970)). See also Missouri Pacific 

Railroad Company v. Kansas Gas & Electric Company, 862 F. 2d 796, 

799 (10th Cir. 1988) (citing Brown v. Lang, 675 P.2d 842, 846 

(Kan. 1984)) ('When the intent of the parties to a contract is 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 10 
clearly ascertainable by construing the .. document from its four 

corners it is not considered ambiguous; although some terms may be 

conflicting, extrinsic evidence is inadmissible and rules of 

construction applicable to ambiguous contracts do not apply.'). 

Endorsement No. 3 does not contain "language of doubtful or 

conflicting meaning." Further, there is no genuine uncertainty as 

to its meaning. Thus, as the district court properly concluded, 

Endorsement No. 3 is not ambiguous. 

The School District directs us to two state court decisions 

that allegedly held that the phrase "arising out of" is ambiguous. 

In Dora Township v. Indiana Insurance Company, 400 N.E.2d 921 

(Ill. 1980), a wrongful death action was brought against the 

Township for failure to properly maintain a stop sign, which was 

not clearly visible to travelers on County Road North. The 

Township presented a claim for coverage to the Indiana Insurance 

Company pursuant to the terms of its comprehensive liability 

policy. Indiana rejected the claim on the ground that the 

occurrence fell within an exclusionary endorsement in the policy 

of insurance. That clause provided: "in consideration of the 

premium for which this policy is issued, it is agreed the policy 

does not apply to any loss or claim arising out of the existence 

of any highways, roads, streets, sidewalks, culverts or bridges, 

owned, maintained, repaired or controlled by the named insured." 

Id. (Emphasis added). 

In Dora Township, the Illinois Supreme Court did not hold 

that the phrase "arising out of" was ambiguous as a matter of 

course, but instead found that the foregoing endorsement was 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 11 
ambiguous as a .Mhole. The court therefore found for ~he Township. 

The state court did not definitively hold that the phrase "arising 

out of" was ambiguous in all situations, on the contrary it 

applied the general rules of construction to the facts of that 

case; where language in an insurance policy is subject to 

different interpretations such ambiguity is to be construed in 

favor of the insured, and not the insurance company. 

The court in Johns v. State Farm Fire & Casualty Company, 349 

So. 2d 481 (La. App. 1977), also did not find that the phrase 

"arising out of" in an insurance policy was ambiguous. In that 

case, the court reversed the lower court's decision and remanded 

the lawsuit for a determination of what the exclusionary clause in 

the insurance policy meant. The exclusionary clause contained in 

the insurance policy issued by State Farm provided that the policy 

did not cover any injury or property damage arising out of the 

ownership, maintenance, operation or use of any motor vehicle 

owned or operated by the insured. Id. The plaintiff had 

instituted the action to recover damages for personal injuries, 

medical expenses, and loss of earnings all sustained when a safety 

rope, one end of which was attached around plaintiff's waist and 

the other end secured to an operating vehicle, broke causing 

plaintiff to fall some 30 feet. The trial court had dismissed 

plaintiff's action and granted State Farm's motion for summary 

judgment finding that the exclusionary clause was applicable. The 

appellate court disagreed with the trial court's grant of summary 

judgment and remanded the lawsuit for further proceedings to 

determine whether the exclusionary clause applied. · The court was 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 12 
careful to point out that it was making no determination as to 

whether the exclusionary clause in the policy applied. 

Contrary to the School District's contentions that the phrase 

"arising out of" is inherently ambiguous, this court has held that 

it is not. In Missouri Pac. R. Co. v. Kansas Gas & Elec. Co., 862 

F.2d 796 (10th Cir. 1988), this court, applying Kansas law, found 

that KG & E's agreement to indemnify MoPac for damages "arising 

out of" the failure of KG & E to comply with certain safety 

provisions was plain and unambiguous. According to Paragraph 

three of the agreement entered into between Kansas Gas and 

Missouri Pacific, 

[s]hipper [KG & E] assumes full responsibility for, and 

shall defend, indemnify and save harmless the Carrier 

[MoPac] from and against, any and all liability, suits, 

claims, damages, costs, losses, outlays and 

expenses in any manner caused by, arising out of or 

connected with the failure or refusal of Shipper to 

comply with, observe or perform any of the provisions of 

this Paragraph 3 •••• (Emphasis added). 

Id. at 797. 

This court discussed the meaning of Paragraph three as 

follows: 

KG & E's assertion that MoPac must show something akin 

to proximate cause before it is entitled to 

indemnification simply is not supported by the language 

of paragraph three. KG & E agreed to indemnify MoPac 

for any claim 'in any manner caused by, arising out of 

or connected with' the failure of KG & E to keep the 

track clear of obstructions. See Pestock v. State Farm 

Auto. Ins. Co., 9 Kan.App.2d 18~674 P.2d 1062, 1063 

(1984) (phrase 'arising out of' imparts a more liberal 

concept of causation than proximate cause); Fontenot v. 

Mesa Petroleum Co., 791 F.2d 1207, 1214 (5th Cir. 1986) 

(language 'arising in connection herewith' contained in 

indemnity agreement unambiguously encompasses all 

activities reasonably incident to or anticipated by 

principal activity of contract). (Emphasis added) 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 13 
Id. at 799. 

In Farm Bureau Mutual Ins. Co. v. Evans, 637 P.2d 491, 494 

(Kan. App. 1981), the court interpreted the phrase "arising out 

of" as follows: 

The general rule in other jurisdictions is that 'arising 

out of the use' of a vehicle requires the finding of 

some causal connection or relation between the use of 

the vehicle and the injury. (Citations omitted). 

Stated another way, an injury does not arise out of the 

'use' of a vehicle within the meaning of the coverage 

clause of an automobile liability policy if it is caused 

by some intervening cause not identifiable with normal 

ownership, maintenance and use of the insured vehicle 

and the injury complained of. (Citations omitted). The 

provision, however, imparts a more liberal concept of a 

causation than 'proximate cause' in its traditional, 

legal sense. 

See also Pestock v. State Farm Auto. Ins. Co., 674 P.2d 1062, 1063 

(Kan. App. 1984) ("The phrase 'arising out of the use of' 

imparts a more liberal concept of causation than 'proximate 

cause.' (Citations omitted). Thus it is not necessary to find 

that the injury was directly and proximately caused by the use of 

a vehicle to impart liability •••. "). 

Thus, not only is the phrase "arising out of'' unambiguous, 

but has a well-settled meaning requiring "some causal connection 

or relation between." "Arising out of" imparts a more liberal 

concept of causation than "proximate cause." Therefore, as 

defined by the courts, including this court, the phrase "arising 

out of" as used in the insurance policy does not require 

Continental to establish that the Intervenors' action was 

"proximately caused" by the original Brown complaint. Continental 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 14 
must merely prove that the Intervenors.' lawsuit arose out of the 

original Brown action. As will be discussed more fully below, 

Continental has proven its case. 

The School District further argues that the phrase "prior or 

outstanding litigation" is ambiguous for two reasons. According 

to the School District's contentions: 

[t)he phrase 'prior or outstanding litigation' is 

ambiguous because it is unclear as to whether the prior 

or outstanding litigation must have identity of parties 

and/or identity of issues (neither of which is present 

here). Also unclear and, thefore [sic], ambiguous is 

the significance of use of the term 'pending litigation 

in Endorsement No. 2 and 'prior or outstanding 

litigation' in Endorsement No. 3. 

(Appellant's Brief, at pp. 16-17). These summary conclusions by 

the School District do not create an ambiguity in Endorsement No. 

3. Endorsement No. 3 does not require identity of parties and/or 

identity of issues. It is interesting, however, to note that in 

the 1951 Brown complaint, as well as in the 1979 Intervenors' 

action, the plaintiff class for both lawsuits was defined as black 

children attending Topeka schools. In addition, the 1951 class 

included future members, such as the Intervenors, in the action. 

Brown v. Board of Education, 84 F.R.D. 383, 394 (D. Kan. 1979) 

("From the relief ordered, it seems obvious that the class 

consisted of Black students attending elementary schools in the 

Topeka school district. In light of the prospective nature of the 

relief ordered, it is further obvious that the class definition 

included future members of the class."). Furthermore, the School 

District is the successor to the Topeka Board of Education in 

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.. • 

PI LUO 

United St~ftt Coore af Apptals 

Tenth Cira.tit 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

APR 2 5 1990 

&OBERT L. HOECKER 

Clerk 

UNIFIED SCHOOL DISTRICT #501, Shawnee 

County, State of Kansas, 

Plaintiff-Appellant, 

v. 

CONTINENTAL CASUALTY COMPANY, 

Defendant-Appellee. 

ORDER AND JUDGMENT* 

No. 89-3097 

(D.C. No. 1083-5) 

(Dist. of Kansas) 

Before BRORBY and BARRETT, Circuit Judges, and WEST*, District 

Judge. 

The Honorable Lee R. West, United States District Judge for the 

District of Western Oklahoma, sitting by designation. 

Unified School District No. 501, Shawnee County, Kansas 

(School District)), the insured, seeks a declaratory judgment that 

Continental Casualty Company (Continental), the insurer, has a 

duty to reimburse the School District for the losses incurred 

defending against specific claims made in 1979 by the Intervenors 

in Brown v. Board of Education, Case No. T-316 (Brown). This 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of th~ case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 16 
,. 

all-eged duty. i·S -,predicated upon the -contract of insurance entered 

into between the parties (Policy). The parties filed crossmotions for summary judgment and on March 29, 1989, the district 

court entered judgment in favor of Continental. 

In granting Continental's motion for summary judgment, the 

district court concluded that Endorsement No. 3 to the Policy was 

unambiguous and excluded coverage for losses sustained as a 

consequence of the Intervenors' action. 

provides as follows: 

Endorsement No. 3 

COVERAGE SHALL EXCLUDE ANY LOSS ARISING OUT OF PRIOR OR 

OUTSTANDING LITIGATION OR ACTS WHICH GAVE RISE THERETO. 

(R., Vol. 1, Doc. 1 Ex. 1, Insurance Policy) 

original). 

(Emphasis in 

The district court concluded that the Intervenors' action 

"arose out" of the Brown lawsuit which was outstanding litigation 

at the time the motion to intervene was filed. Thus, Endorsement 

No. 3 precluded coverage under the Policy. 

FACTS 

On February 28, 1951, Oliver Brown brought a class action on 

behalf of all black children attending elementary schools in the 

Topeka School district. In the 1951 complaint, the Brown 

plaintiffs alleged that the opportunities provided to children 

attending all black schools were inferior to those provided to 

children attending all white schools, including the physical 

facilities, curricula, teaching resources, and student personnel 

services, as well as other services. In addition to these 

factors, they alleged that segregation itself resulted in an 

inferior education for blacks and thus violated the Fourteenth 

-2-

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 17 
,. 

.. Amendment to -the United States Cons ti tut ion. The Brown plaintiffs 

sought a permanent injunction restraining the enforcement, 

operation and execution of a state statute that provided for 

segregation of schools for the education of black children and 

white children below the high school level. Further, these 

plaintiffs sought a declaratory judgment declaring 

unconstitutional the state statute and the segregation scheme set 

up thereunder by the school authorities of the City of Topeka. 

The district court held for the defendants finding that the 

doctrine of "separate but equal'' in the school systems did not 

violate the constitutional guarantees of due process of law. 

That court further found that the physical facilities, the 

curricula, the courses of study, and the qualifications and 

quality of teachers, as well as other educational facilities in 

the two sets of schools, were comparable. Brown v. Board of 

Education, 98 F. Supp. 797 (D. Kan. 1951). 

On May 17, 1954, the United States Supreme Court reversed the 

district court. In finding for the plaintiffs, the Supreme Court 

held that "in the field of public education the doctrine of 

'separate but equal' has no 

facilities are inherently unequal." 

347 U.S. 483, 495 (1954) (Brown I). 

place. Separate 

Brown v. Board of 

educational 

Education, 

In Brown I, the Court invited the parties to submit briefs on 

the question of the appropriate remedy for the constitutional 

violation. In Brown v. Board of Education, 349 U.S. 294 (1955) 

(Brown II), the Court concluded that the local federal district 

-3-

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 18 
court -should monitor the School District's actions in implementing 

the constitutional principles set forth in Brown I. 

On remand, the district court held a full hearing to 

determine whether the School District's plan for desegregation 

complied with the Supreme Court's mandate. On October 28, 1955, 

the district court entered an order finding that the plans 

submitted by the School District constituted a good faith 

beginning towards compliance with the Supreme Court's order. The 

district court stated as follows: 

There are a number of respects in which we feel that the 

plan does not constitute full compliance with the 

mandate of the Supreme Court, but that mandate implies 

that some time will be required to bring that about. 

The elements that we feel do not constitute full 

compliance are mostly of a minor nature but since this 

is not a final decree no useful purpose would be served 

by setting them out herein. 

*** 

It is the conclusion of the court that while complete 

desegregation has not been accomplished in the Topeka 

School System, a good faith effort toward that end has 

been made and that, therefore, the plan adopted by the 

Board of Education of the City of Topeka be approved as 

a good faith beginning to bring about complete 

desegregation. Jurisdiction of the cause for the 

purpose of entering the final decree is retained until 

such time as the Court feels there has been full 

compliance with the mandate of the Supreme Court. 

Brown v. Board of Education, 139 F. Supp. 468, 468-469 (D. Kan. 

1955). 

On August 22, 1979, the Intervenors filed their "Motion For 

An Order Commanding Compliance With The Supreme Court Mandate To 

Desegregate The Schools In The Case of Brown v. Board of Education 

of Topeka, 349 U.S. 294." The Intervenors presented their motion 

as follows: 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 19 
Come now -the intervening plaintiffs and move the 

Court to issue an order commanding Unified School 

District #501 of Topeka, Kansas to desegregate the 

schools operated by said school district and establish a 

racially integrated and unitary school system as ordered 

by the United States Supreme Court in Brown v. Board of 

Education of Topeka, supra. (Emphasis added). 

In support 

plaintiffs state: 

of this Motion, the intervening 

1. That they are Black Americans who reside in 

Topeka, Kansas. 

2. That the adult plaintiffs are parents of the 

minor children plaintiffs who attend public schools 

within Unified School District #501 of Topeka, Kansas. 

3. That United School District #501 is the 

successor to the Board of Education of Topeka, Shawnee 

County, Kansas, defendant in Brown v. Board of Education 

of Topeka. 

4 Defendant school district is required by the law 

of the State of Kansas to maintain and operate a system 

of public schools in Unified School district #501 in 

Shawnee County, Kansas and defendant school district is 

presently operating such public schools in said county 

and State. 

5. The the United States Supreme Court in Brown v. 

Board of Education of Topeka, supra ordered the Board of 

Education of Topeka to adopt and implement a plan to 

desegregate the schools operated by said Board of 

Education and establish a unitary and integrated school 

system "with all deliberate speed." 

6. The United State Supreme court in Brown further 

ordered that the United States District Court for the 

District of Kansas retain jurisdiction over the Brown 

case until the Board of Education of Topeka achieved 

full compliance with its mandate. (Emphasis added). 

7. That notwithstanding the Supreme court's 

mandate, the former Board of Education of Topeka and the 

current Unified School district #501 have both failed to 

desegregate the schools and establish a unitary and 

integrated school system. (Emphasis added). 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 20 
(R., Vol. I, Doc. 1, Ex. 3, - Motion for an Order Commanding 

Compliance With the Supreme Court Mandate to Desegregate the 

Schools in the Case of Brown v. Board of Education of Topeka). 

The motion to intervene was granted on November 29, 1979, and 

the Brown lawsuit subsequently proceeded to trial. On April 9, 

1987, the district court entered a final judgment finding that the 

School District had fully complied with the Supreme Court's 

mandate in Brown I and Brown II. Brown v. Board of Education, 671 

F. Supp. 1290 (D. Kan. 1987). On January 29, 1990, this court 

reversed in part the 1987 order and held that the School District 

did not meet its burden of establishing a lack of causal 

connection between the current conditions of segregation and the 

prior de jure system. Further, this court held that the Topeka 

school system was not unitary under constitutional standards and 

was therefore in violation of Title VI of the 1964 Civil Rights 

Act. Brown v. Board of Education, 892 F.2d, 851 (10th Cir. 1990) 

(Baldock, Circuit Judge, dissenting). 

At issue in this action is the insurance agreement entered 

into between Continental and the School District with an effective 

policy period from October 15, 1976, to October 15, 1979. This 

Policy was thereafter renewed and continued in effect from October 

15, 1979, until on or about October 18, 1984, when Continental 

canceled the policy. 

This Policy is a "reimbursement policy" wherein Continental 

agreed that if a claim was brought against the School District for 

a "wrongful act" occurring during the Policy period then, provided 

that no exclusions were applicable, Continental would pay the 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 21 
.. School Dist~ict for any ''losses~ which the School District became 

legally obligated to pay. Wrongful Act is defined in Section 

III(c) of the Policy to include, among other things, any "act or 

omission or neglect or breach of duty by the Assureds in the 

discharge of their duties." (R., Vol. I, Doc. 1, Ex. 1, Insurance 

Policy). Loss is defined in Section III(d) of the Policy and 

encompasses any amount which the School district is "legally 

obligated to pay'' including damages, judgments, and "cost of 

investigation and defense of legal actions. II Id. 

Also included in the Policy is a Prior Wrongful Act 

Endorsement, which states as follows: 

The coverage afforded by this endorsement shall not 

apply to any claim, suit, action or proceeding pending 

at the effective date of this endorsement or to any 

Wrongful Act if, at the inception date of this 

endorsement, the School District or an Assured could 

reasonably have expected that a claim, suit, action or 

proceeding would result therefrom. 

Id. As stated before, the Policy also provided that: 

Id. 

COVERAGE SHALL EXCLUDE ANY LOSS ARISING OUT OF PRIOR OR 

OUTSTANDING LITIGATION OR ACTS WHICH GAVE RISE THERETO. 

By letter dated December 6, 1979, the School District 

notified Continental of the 1979 claims made against it by the 

intervening plaintiffs. Continental then notified the School 

District on May 16, 1980, that it was denying any liability in 

connection with the 1979 Brown claims made against the School 

District, and denied that the Policy afforded any coverage to the 

School District in connection with the claims of the Intervenors. 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 22 
Continental denied coverage based- upon ~Endorsements No. 2 and No. 

3 of the Policy. 

A second amended complaint was filed by the Intervenors on 

May 27, 1986. This complaint added a new claim for relief 

pursuant to Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 

2000d. Continental still refused to pay the School District for 

the losses incurred in defending against the Intervenors in Brown. 

On March 23, 1989, the district court granted Continental's 

motion for summary judgment and denied the School District's 

summary judgment motion. In holding for Continental, the district 

court concluded that Endorsement No. 3 was not ambiguous and that, 

therefore, the words would have to be applied according to their 

plain, ordinary and popular sense. Because that Endorsement 

specifically excluded from coverage any loss arising out of 

outstanding litigation, the School District's motion was denied. 

The district court held that the intervening plaintiffs' case was 

simply a continuation of the Brown case. "In fact, the 

intervening plaintiffs' case ultimately determined whether Topeka 

had finally complied with the original mandate resulting from the 

earlier litigation in this case." (R., Vol. I, Doc. 48, 

Memorandum and Order at p. 6). Thus, the intervening plaintiffs' 

case ended the ongoing Brown litigation. Id. 

The School District is now 

order concerning Continental's 

under the Policy. 

appealing the district court's 

liability to the School District 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 23 
ISSUES 

The School District posits the following issues for review: 

I. Whether the district court erred in denying plaintiff 

School District's motion for partial summary judgment. 

A. Whether the district court erred in determining that 

the exclusionary clause was unambiguous. 

B. Whether the district court erred in failing to 

construe the exclusionary clause narrowly. 

C. Whether the "loss" suffered by the School District 

as a result of the claims made against it in 1979 arose out of 

prior or outstanding litigation. 

D. Whether the district court erred in failing to 

consider prior actions of the defendant. 

II. Whether the district court erred in granting defendant's 

motion for summary judgment. 

DISCUSSION 

I 

A. 

The School District argues that because Endorsement No. 3 is 

susceptible of more than one meaning, it is ambiguous and must be 

construed against Continental, the insurer. According to the 

School District, Endorsement No. 3 is ambiguous because: (1) the 

phrase "arising out of" is ambiguous; (2) the phrase "prior or 

outstanding litigation" is ambiguous; and (3) the differences 

between the clause "acts which gave rise thereto" and the previous 

clause "prior or outstanding litigation" is unclear. 

Continental argues that the foregoing Endorsements are not 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 24 
ambiguous -and should be enforced according to their plain, 

ordinary and popular meaning. Further, since the Policy is clear 

and unambiguous there is no need for judicial interpretation or 

the application of rules of liberal construction; the court's 

function is to enforce the contract according to its terms. 

The general rule concerning ambiguities in insurance 

contracts is that if the terms of a policy are ambiguous, 

uncertain, conflicting or susceptible to more than one 

construction, the policy should be construed most favorably to the 

insured. Wing Mah v. United States Fire Insurance Company, 545 

P. 2d 366 (Kan. 1976). "If, however, the contract is clear and 

unambiguous, the words are to be taken and understood in their 

plain, ordinary and popular sense, and there is no need for 

judicial interpretation or the application of rules of liberal 

construction. " Goforth v. Franklin Life Insurance Company, 

449 P.2d 477, 481 (Kan. 1969). 

Wing 

'When an insurance contract is not ambiguous, the 

court may not make another contract for the parties. 

Its function is to enforce the contract as made .... 

To be ambiguous the contract must contain provisions or 

language of doubtful or conflicting meaning, as gleaned 

from a natural and reasonable interpretation of its 

language. Ambiguity in a written contract does 

not appear until the application of pertinent rules of 

interpretation to the face of the instrument leaves it 

genuinely uncertain which one of two or more meanings is 

the proper meaning.' 

Mah, 545 P. 2d at 369 (quoting Clark v. Prudential Ins. Co., 

464 P.2d 253, 256 (Kan. 1970)). See also Missouri Pacific 

Railroad Company v. Kansas Gas & Electric Company, 862 F. 2d 796, 

799 (10th Cir. 1988) (citing Brown v. Lang, 675 P.2d 842, 846 

(Kan. 1984)) ( 'When the intent of the parties to a contract is 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 25 
clearly ascertainable by construing the . document from its four 

corners it is not considered ambiguous; . although some terms may be 

conflicting, extrinsic evidence is inadmissible and rules of 

construction applicable to ambiguous contracts do not apply.'). 

Endorsement No. 3 does not contain "language of doubtful or 

conflicting meaning." Further, there is no genuine uncertainty as 

to its meaning. Thus, as the district court properly concluded, 

Endorsement No. 3 is not ambiguous. 

The School District directs us to two state court decisions 

that allegedly held that the phrase "arising out of'' is ambiguous. 

In Dora Township v. Indiana Insurance Company, 400 N.E.2d 921 

(Ill. 1980), a wrongful death action was brought against the 

Township for failure to properly maintain a stop sign, which was 

not clearly visible to travelers on County Road North. The 

Township presented a claim for coverage to the Indiana Insurance 

Company pursuant to the terms of its comprehensive liability 

policy. Indiana rejected the claim on the ground that the 

occurrence fell within an exclusionary endorsement in the policy 

of insurance. That clause provided: "in consideration of the 

premium for which this policy is issued, it is agreed the policy 

does not apply to any loss or claim arising out of the existence 

of any highways, roads, streets, sidewalks, culverts or bridges, 

owned, maintained, repaired or controlled by the named insured." 

Id. (Emphasis added). 

In Dora Township, the Illinois Supreme Court did not hold 

that the phrase ''arising out of" was ambiguous as a matter of 

course, but instead found that the foregoing endorsement was 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 26 
. ambiguous as a .. whole. The court theref.ore found for .the Township. 

The state court did not definitively hold that the phrase "arising 

out of" was ambiguous in all situations, on the contrary it 

applied the general rules of construction to the facts of that 

case; where language in an insurance policy is subject to 

different interpretations such ambiguity is to be construed in 

favor of the insured, and not the insurance company. 

The court in Johns v. State Farm Fire & Casualty Company, 349 

So. 2d 481 (La. App. 1977), also did not find that the phrase 

"arising out of" in an insurance policy was ambiguous. In that 

case, the court reversed the lower court's decision and remanded 

the lawsuit for a determination of what the exclusionary clause in 

the insurance policy meant. The exclusionary clause contained in 

the insurance policy issued by State Farm provided that the policy 

did not cover any injury or property damage arising out of the 

ownership, maintenance, operation or use of any motor vehicle 

owned or operated by the insured. Id. The plaintiff had 

instituted the action to recover damages for personal injuries, 

medical expenses, and loss of earnings all sustained when a safety 

rope, one end of which was attached around plaintiff's waist and 

the other end secured to an operating vehicle, broke causing 

plaintiff to fall some 30 feet. The trial court had dismissed 

plaintiff's action and granted State Farm's motion for summary 

judgment finding that the exclusionary clause was applicable. The 

appellate court disagreed with the trial court's grant of summary 

judgment and remanded the lawsuit for further proceedings to 

determine whether the exclusionary clause applied. The court was 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 27 
careful to point .out that it was making no determination as to 

whether the exclusionary clause in the policy applied. 

Contrary to the School District's contentions that the phrase 

"arising out of" is inherently ambiguous, this court has held that 

it is not. In Missouri Pac. R. Co. v. Kansas Gas & Elec. Co., 862 

F.2d 796 (10th Cir. 1988), this court, applying Kansas law, found 

that KG & E's agreement to indemnify MoPac for damages ''arising 

out of'' the failure of KG & E to comply with certain safety 

provisions was plain and unambiguous. According to Paragraph 

three of the agreement entered into between Kansas Gas and 

Missouri Pacific, 

[s]hipper [KG & E] assumes full responsibility for, and 

shall defend, indemnify and save harmless the Carrier 

[MoPac] from and against, any and all liability, suits, 

claims, damages, costs, losses, outlays and 

expenses in any manner caused by, arising out of or 

connected with the failure or refusal of Shipper to 

comply with, observe or perform any of the provisions of 

this Paragraph 3 .... (Emphasis added). 

Id. at 797. 

This court discussed the meaning of Paragraph three as 

follows: 

KG & E's assertion that MoPac must show something akin 

to proximate cause before it is entitled to 

indemnification simply is not supported by the language 

of paragraph three. KG & E agreed to indemnify MoPac 

for any claim 'in any manner caused by, arising out of 

or connected with' the failure of KG & E to keep the 

track clear of obstructions. See Pestock v. State Farm 

Auto. Ins. Co., 9 Kan.App.2d 1aa-;-674 P.2d 1062, 1063 

(1984) (phrase 'arising out of' imparts a more liberal 

concept of causation than proximate cause); Fontenot v. 

Mesa Petroleum Co., 791 F.2d 1207, 1214 (5th Cir. 1986) 

(language 'arising in connection herewith' contained in 

indemnity agreement unambiguously encompasses all 

activities reasonably incident to or anticipated by 

principal activity of contract). (Emphasis added) 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 28 
Id. at 799. 

In Farm Bureau Mutual Ins. Co. v. Evans, 637 P.2d 491, 494 

(Kan. App. 1981), the court interpreted the phrase "arising out 

of" as follows: 

The general rule in other jurisdictions is that 'arising 

out of the use' of a vehicle requires the finding of 

some causal connection or relation between the use of 

the vehicle and the injury. (Citations omitted). 

Stated another way, an injury does not arise out of the 

'use' of a vehicle within the meaning of the coverage 

clause of an automobile liability policy if it is caused 

by some intervening cause not identifiable with normal 

ownership, maintenance and use of the insured vehicle 

and the injury complained of. (Citations omitted). The 

provision, however, imparts a more liberal concept of a 

causation than 'proximate cause' in its traditional, 

legal sense. 

See also Pestock v. State Farm Auto. Ins. Co., 674 P.2d 1062, 1063 

(Kan. App. 1984) ("The phrase 'arising out of the use of' 

imparts a more liberal concept of causation than 'proximate 

cause.' (Citations omitted). Thus it is not necessary to find 

that the injury was directly and proximately caused by the use of 

a vehicle to impart liability .••. "). 

Thus, not only is the phrase "arising out of'' unambiguous, 

but has a well-settled meaning requiring "some causal connection 

or relation between." "Arising out of" imparts a more liberal 

concept of causation than "proximate cause." Therefore, as 

defined by the courts, including this court, the phrase "arising 

out of" as used in the insurance policy does not require 

Continental to establish that the Intervenors' action was 

"proximately caused" by the original Brown complaint. Continental 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 29 
must merely prove -that the Intervenors! lawsuit arose out of the 

original Brown action. As will be discussed more fully below, 

Continental has proven its case. 

The School District further argues that the phrase "prior or 

outstanding litigation" is ambiguous for two reasons. According 

to the School District's contentions: 

[t)he phrase 'prior or outstanding litigation' is 

ambiguous because it is unclear as to whether the prior 

or outstanding litigation must have identity of parties 

and/or identity of issues (neither of which is present 

here). Also unclear and, thefore [sic), ambiguous is 

the significance of use of the term 'pending litigation 

in Endorsement No. 2 and 'prior or outstanding 

litigation' in Endorsement No. 3. 

(Appellant's Brief, at pp. 16-17). These summary conclusions by 

the School District do not create an ambiguity in Endorsement No. 

3. Endorsement No. 3 does not require identity of parties and/or 

identity of issues. It is interesting, however, to note that in 

the 1951 Brown complaint, as well as in the 1979 Intervenors' 

action, the plaintiff class for both lawsuits was defined as black 

children attending Topeka schools. In addition, the 1951 class 

included future members, such as the Intervenors, in the action. 

Brown v. Board of Education, 84 F.R.D. 383, 394 (D. Kan. 1979) 

("From the relief ordered, it seems obvious that the class 

consisted of Black students attending elementary schools in the 

Topeka school district. In light of the prospective nature of the 

relief ordered, it is further obvious that the class definition 

included future members of the class."). Furthermore, the School 

District is the successor to the Topeka Board of Education in 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 30 
place in 1951. Id. - at 389. - Thus, clearly there is an identity of 

parties. 

Moreover, the issues are the same; the 1951 complaint and the 

Intervenors' complaint both alleged that the School District 

maintained racially segregated schools in violation of the 

Fourteenth Amendment to the United States Constitution. This is 

evidenced by the fact that the Intervenors in the 1979 action were 

specifically seeking an "Order Commanding Compliance With The 

Supreme Court Mandate To Desegregate The Schools In The Case of 

Brown v. Board Of Education Of Topeka, 349 U.S. 294." Therefore, 

the issue of whether the School District maintained racially 

segregated schools was very much involved in both proceedings. 

The School District's second reason for finding ambiguity in 

the phrase "prior or outstanding" 

merit. Endorsement No. 2 provides: 

litigation is also without 

IN CONSIDERATION of the additional premium at which this 

Policy is issued it is agreed that this Policy is 

extended to provide coverage for Wrongful Acts which 

gccurred prior to the inception date of the Policy 

provided always however that if during this Policy 

Period: 

(1) The School District or the Assureds, or any of 

them, shall receive written or oral notice from any 

party that it is the intention of such party to hold the 

School District or the Assureds, or any of them, 

responsible for a Wrongful Act: or 

(2) The School District or the Assureds, or any of them, 

shall become aware of any occurrence which may 

subsequently give rise to a claim made against the 

School District or the Assureds, or any of them, for a 

Wrongful Act: 

and shall in either case during the Policy Period give 

immediate written notice to the Insurer of the receipt 

of such written or oral notice under Clause (1) or of 

such occurrence under Clause (2), then any claim which 

may subsequently be made against the School District or 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 31 
- the . Assureds, or any of them, 

months following expiration 

the . purpose of this Policy be 

during this Policy Period. 

within the space of twelve 

of this Policy shall, for 

treated as a claim made 

The coverage afforded by this endorsement shall not 

apply to any claim, suit, action or proceeding pending 

at the effective date of this endorsement or to any 

Wrongful Act if, at the inception date of this 

endorsement, the School District or an Assured could 

reasonably have expected that a claim, suit, action or 

proceeding would result therefrom. (Emphasis added). 

(R., Vol. I, Doc. 1, Ex. 1, Insurance Policy). Endorsement No. 2 

does not contain the phrase "pending litigation." However, giving 

the School District the benefit of the doubt, we will assume that 

the School District is concerned with the final sentence of the 

above Endorsement which states: "The coverage afforded by this 

endorsement shall not apply to any claim, suit, action or 

proceeding pending at the effective date of this endorsement. 

" (Emphasis added). 

In comparing the two phrases, no ambiguity is created. 

Taking these phrases in their plain, ordinary and popular sense, 

we find it obvious that Continental's purpose behind including 

them in the Policy was to make it clear that it would not be 

liable under the Policy for any claim, suit, action or proceeding 

that was pending or outstanding at the time the insurance contract 

was entered into between the School District and Continental. 

Therefore, we are compelled to enforce this contract as written. 

See Goforth v. Franklin Life Insurance Company, 449 P.2d at 481. 

The School district also argues that the exclusionary clause 

is ambiguous because the difference between the clause "acts which 

gave rise thereto" and the clause "prior or outstanding 

litigation" is unclear. The School District's contention is that 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 32 
"the acts giving rise to the original Brown litigation have 

virtually no connection with the claims raised by the intervenors. 

Long before the intervening plaintiffs' claims were asserted the 

four all-black schools which were the subject of the initial Brown 

litigation had been closed." (Appellant's Brief, at p. 17). 

As with the remaining language of the Endorsement, these 

words have plain and obvious meaning. There is no genuine 

uncertainty as to the meaning of the Endorsement. Rather, as 

stated before, it is clear that any loss arising from prior or 

outstanding litigation is excluded from coverage. Furthermore, 

the purpose behind the original Brown proceeding was not limited 

to closing the four all-black schools located in Topeka. The 

original lawsuit was brought to abrogate segregation. The 

Intervenors' action was to enforce the desegregation orders 

entered in Brown I and Brown II. 

B. 

The School District further contends that the district court 

failed to correctly apply the basic rule of construction that 

exclusionary clauses in insurance policies are to be construed 

against the insurer in favor of coverage. The School District 

cites Dronge v. Monarch Ins. Co. of Ohio, 511 F. Supp. 1, 4 (D. 

Kan. 1979) for the following proposition: 

If the insurer intends to restrict or limit coverage 

provided in the policy, it must use clear and 

unambiguous language in doing so, employing such 

language as will clearly and distinctly reveal its 

stated purpose. (Citations omitted). This rule of 

construction applies with particular force to provisions 

which attempt to exclude liability coverage under 

certain conditions. (Citations omitted). It is a 

general _rule that exceptions, limitations and exclusions 

to insuring agreements require a narrow construction on 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 33 
the theory ~hat the insurer, -having affirmatively 

expressed coverage through broad promises, assumes a 

duty to define any limitations on that coverage in clear 

and explicit terms. 

As stated and discussed in detail above, the Policy in question 

stated the exclusions and defined the limitations in clear and 

explicit terms. We hold that the district court narrowly 

construed the Policy against Continental and arrived at the 

correct conclusion that the Endorsements and exclusions were 

unambiguous. 

C. 

The School District's third argument is that the "loss" 

suffered by the School District as a result of the claims made by 

the intervening plaintiffs did not "arise out of prior or 

outstanding litigation" so as to preclude coverage under the 

Policy. The School District asserts that since one item of "loss'' 

for which it seeks reimbursement under the Policy is the cost of 

investigation and defense of the 1979 claims brought by the 

Intervenors, it could not have arisen out of the 1950's litigation 

or acts which gave rise thereto. The School District maintains 

that 

"[i]t is questionable whether defense costs could ever 

arise out of prior litigation -- they are naturally a 

result of current litigation. In any event, no 

reasonable construction permits a finding that defense 

costs incurred by the School District in defense of 

claims made for the first time in 1979 arose out of 

litigation of the 1950's or acts which gave rise 

thereto." 

(Appellant's Brief, at p. 20). 

As discussed previously, the phrase "arising out of" imparts 

a more liberal concept of causation than "proximate cause." 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 34 
Pestock, 674 P.2d . at 1063. Thus, it is -·. not ne.cessary for 

Continental to prove that the costs . associated with the 1979 

litigation were directly and proximately caused by the Brown I and 

Brown II lawsuits. Id. Continental must merely show that the 

costs of the 1979 action were reasonably incident to the original 

Brown proceedings. See Missouri Pac. R. Co., 862 F.2d at 799. We 

conclude that Continental has carried this burden. 

The School District further contends that the claims made by 

the Brown I plaintiffs are distinctly different from the claims 

made by the Intervenors. The fundamental factual differences 

asserted by the School District are as follows: (1) the holdings 

in Brown I and Brown II were limited to the School District's 

assignment of students in grades K-6 solely on the basis of race, 

whereas the Intervenors' claims alleged unlawful practices of the 

School District at the middle and high school levels as well; and 

(2) student assignment to black and white schools was the only 

issue in the original Brown actions, whereas the Intervenors took 

issue not only with school assignment of students, but with the 

School District's policies with respect to faculty and staff 

assignment, transportation, extracurricular activities, 

facilities, open enrollment, and attendance boundaries which they 

alleged were a failure to integrate. 

In granting the motion to intervene, the district court 

disposed of the School Districts first argument as follows: 

Topeka intentionally segregated elementary schools in 

1951. Elementary schools constitute a meaningful 

portion of the school district. The Keyes presumptions, 

in light of Topeka's use of a 'feeder' school system, 

provide a basis for finding that segregation in junior 

high and high schools, if any, is purposeful. Thus, 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 35 
continued supervision of the Topeka schools under the 

decree in Brown II would naturally have led the Court 

over the years to turn its attention to -the possibility 

of segregation in the junior and senior high schools, 

and now to the middle schools which are being adopted in 

Topeka. 

This fact was recognized in the Weinberger case by the 

defendant [the School District] which argued that the 

school system was under court supervision in opposition 

to the government's position that an HEW investigation 

of the entire system was not barred because this case, 

as originally filed, involved only elementary schools. 

(Emphasis in original). 

Brown, 84 F.R.D. at 401. Thus, it was the School District that 

took the position in U.S.D. # 501 v. Weinberger, 74-160-C5, that 

since the district court in 1955 retained jurisdiction to monitor 

the School District's actions with regard to desegregating the 

school system, HEW could not bring a separate action claiming that 

the schools were still segregated. 

In Weinberger, HEW prepared to cut off federal aid to the 

Topeka schools and scheduled an administrative hearing on the 

matter after concluding that the School District had failed to 

desegregate the schools. On August 7, 1974, the School District 

filed an action to enjoin the cut off of federal funds and to 

enjoin HEW from holding the administrative hearing. It was the 

school board's theory that Brown was still an open case and that 

HEW was thereby precluded from holding an administrative hearing. 

The School District argued that the district court had exclusive 

jurisdiction to determine whether the School District was in 

compliance with the Supreme Court mandate. HEW argued that the 

case was different because the original plaintiffs in the case 

were attacking segregation at only the elementary school level, 

whereas HEW was charged with investigating discrimination in all 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 36 
aspects at all -levels of the public school system. The School 

District in essence claimed that it was irrelevant whether HEW was 

concerned with all levels of the school system; it argued that the 

entire case was subject to the jurisdiction of the district court. 

The district court granted the School District's motion for a 

preliminary injunction finding that the district court had 

exclusive jurisdiction to hear matters concerned with the original 

Brown proceedings. The Weinberger case was eventually dismissed 

by stipulation of the parties. Brown, 84 F.R.D. at 390. Thus, 

the School District has previously argued that all matters 

concerned with the Brown proceedings must be heard by the district 

court, regardless of whether new issues are injected into the 

lawsuit. 

The Intervenors alleged that in 1979 the School District had 

not complied with the mandate of the Supreme Court in Brown. In 

support of this assertion, the Intervenors pointed to the fact 

that a vast majority of black children attended schools in which 

the enrollment of black students was disproportionately high and 

the vast majority of white students attended schools in which the 

enrollment of white students was disproportionately high. As 

recognized by the district court, this resulted from the fact that 

the segregated elementary schools fed into the middle and high 

schools. Id. Consequently, segregation in these schools was an 

issue raised by the 1951 complaint. 

The Intervenors emphasized that the relief they sought was 

compliance with the Brown proceedings by the title of their 

motion; "Motion For An Order Commanding Compliance With The 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 37 
Supreme Court Mandate To _Desegregate The Schools In The Case Of 

Brown v. Board Of Education Of Topeka, 349 U.S. 294." It is 

further clear, from the content of the motion, that the 

Intervenors were alleging that the constitutional violation first 

asserted in 1951 had not been adequately remedied according to the 

Supreme Court orders entered in the case. Moreover, a review of 

the orders entered in the Brown lawsuit shows that the 

Intervenors' petition for a final judgment in the action was 

directly and causally linked to the 1951 complaint. In fact, the 

recent order entered by this court specifically addressed the 

connection between the segregative practices in 1951 and the 

current disparities. 

What the school district has done to integrate is 

crucial in determining whether the causal link between 

the prior segregation and current disparities has been 

severed. The district may carry its burden by showing 

that it has acted affirmatively to desegregate. Absent 

such proof, the court must presume that current 

segregation is the result of prior intentional state 

action. (Emphasis added). 

Brown, 892 F.2d at 863. 

This court held that the School District has failed to remedy 

the prior acts of segregation. 

After reviewing the record, we have concluded that there 

is a current condition of segregation in Topeka. 

Contrary to the district court, we are convinced that 

this condition is causally connected to the prior de 

jure system of segregation. (Emphasis added). 

Id. Thus, we hold that the orders entered in the Intervenors' 

action finding that the Intervenors' proceedings are causally 

linked to Brown I and Brown II are correct. 

The School District also maintains that the Intervenors' 

action was fundamentally different from the original 

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Brown 

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 38 
proceedings in that student assignment to black and white schools 

was the only issue in the~ original Brown action. However, the 

intervening plaintiffs took issue not only with assignment of 

students, but with the School District's policies with respect to 

faculty and staff assignment, transportation, extracurricular 

activities, facilities, open enrollment, attendance boundaries, 

school annexations, school closings, school construction, and 

demographic changes which they alleged were a 

integrate. 

failure to 

In Brown I, the Supreme Court affirmed the constitutional 

violation alleged in the 1951 complaint and then invited the 

parties to submit briefs on the question of the appropriate remedy 

for that constitutional violation. In Brown II, the Court 

concluded that the local federal district courts should monitor 

the School District's actions in implementing the constitutional 

principles set forth in Brown I. The Court remanded the case to 

the district court with the following instructions: 

While giving weight to these public and private 

considerations, the courts will require that the 

defendants make a prompt and reasonable start toward 

full compliance with our May 17, 1954, ruling. Once 

such a start has been made, the courts may find that 

additional time is necessary to carry out the ruling in 

an effective manner. The burden rests upon the 

defendants to establish that such time is necessary in 

the public interest and is consistent with good faith 

compliance at the earliest practicable date. To that 

end, the courts may consider problems related to 

administration, arising from the physical condition of 

the school plant, the school transportation system, 

personnel, revision of school districts and attendance 

areas into compact units to achieve a system of 

determining admission to the public schools on a 

nonracial basis, and revision of local laws and 

regulations which may be necessary in solving the 

foregoing problems. They will also consider the 

adequacy of any plans the defendants may propose to meet 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 39 
0 .distr ict . has complied with the Supreme 

desegregate schools. 

Court mandate to 

The district court also addressed the contention concerning 

the School District's policies adopted many years after the 

original Brown proceedings, such as the open enrollment policy, 

school construction, and attendance boundaries. The district 

court held that had the court's retention of jurisdiction since 

1955 been an active one, these matters would have come before the 

court's direct scrutiny because a court must take into account 

changed circumstances when it has retained jurisdiction to enforce 

a desegregation order. "[I]t is a court's obligation to monitor 

actions taken after rendition of judgment which may increase 

segregation in the school system." (Emphasis added}. Id. at 402. 

The School District's next argument is that intervening legal 

developments preclude a finding that the claims asserted by the 

Intervenors in 1979 arose out of prior or outstanding litigation. 

In support of this contention, the School District states as 

follows: 

[O]ver the course of some 20 years (between Brown I and 

Keyes), desegregation law has undergone a substantive 

change from merely prohibiting segregation on the basis 

of race to mandating affirmative duties to accomplish 

integration in not only student assignment, but also 

with respect to faculty, staff, transportation, 

extracurricular activities and facilities. 

These substantive and far-reaching legal developments, 

occurring between the initial Brown litigation and the 

intervenors' claims for relief, realistically preclude a 

finding that the intervenors' claims arose out of the 

litigation of Brown I and Brown II, or acts which gave 

rise thereto. 

(Appellant's Brief, at p. 31-32). We disagree. 

In granting the motion to intervene, the Brown court stated: 

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[I]n - light of~the ~ording of the October 28, 1955 order 

of the trial court and the fact that no order of - compliance has ever been issued, this action, although 

dormant, has been technically open for the past 24 

years. When, as here, a court retains jurisdiction over 

a school desegregation case in order to enforce its 

orders, changes in the law must be applied as they 

occur. (Emphasis added). 

Brown, 84 F.R.D. at 401. Thus, the changes in the law since the 

1951 Brown complaint do not break the causal connection with the 

Intervenors' action. 

It is undisputed that in monitoring school desegregation 

pursuant to Brown II, the courts have continuously defined and 

redefined the remedy for the constitutional violation which 

occurred because a school system was racially segregated under 

compulsion of state law. See Keyes v. School District No. 1, 

Denver, Colorado, 413 U.S. 189 (1973). The evolution of the 

desegregation remedy in these cases trace directly back to Brown I 

and Brown II, however. To the extent that the courts required 

school districts to take affirmative steps towards desegregation, 

these steps were deemed necessary to satisfy the requirements of 

Brown I. 

The School District argues that since the Supreme Court in 

Green v. School Board of New Kent County, 391 U.S. 430 (1968), and 

Swann v. Charlotte-Mecklenburg Board of Education, 402 U.S. 1 

(1971), imposed an affirmative duty on school districts to 

desegregate, the Intervenors' action could not have arisen out of 

the original Brown proceedings. The duty to desegregate discussed 

in both Green and Swann is the same duty imposed by Brown II. 

In Green, the court stated as follows: 

In the light of the command of [Brown II], what is 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 41 
· -involved- here -is- the -- question .whether the Board has 

achieved the 'racially nondiscriminatory school system' 

Brown II held must be effectuated in order to remedy the 

established unconstitutional deficiencies of its 

segregated system. In the context of the state-imposed 

segregated pattern of long standing, the fact that in 

1965 the Board opened the doors of the former 'white' 

school to Negro children and of the 'Negro' school to 

white children merely begins, not ends, our inquiry 

whether the Board has taken steps adequate to abolish 

its dual, segregated system. Brown II was a call for 

the dismantling of well-entrenched dual systems tempered 

by an awareness that complex and multifaceted problems 

would arise which would require time and flexibility for 

a successful resolution. School boards such as the 

respondent then operating state-compelled dual systems 

were nevertheless clearly charged with the affirmative 

duty to take whatever steps might be necessary to 

convert to a unitary system in which racial 

discrimination would be eliminated root and branch. 

(Citations omitted). The constitutional rights of Negro 

school children articulated in Brown I permit no less 

than this; and it was to this end that Brown II 

commanded school boards to bend their efforts. 

(Emphasis added). 

Green, 391 U.S. at 437-438. 

Similarly, in Swann, the court recognized that the 

affirmative duty discussed in Green was previously imposed by 

Brown I and Brown II. In Swann, the court stated: 

The objective today remains to eliminate from the public 

schools all vestiges of state-imposed segregation. 

Segregation was the evil struck down by Brown I as 

contrary to the equal protection guarantees of the 

Constitution. That was the violation sought to be 

corrected by the remedial measures of Brown II. That 

was the basis for the holding in Green that school 

authorities are 'clearly charged with the affirmative 

duty to take whatever steps might be necessary to 

convert to a unitary system in which racial 

discrimination would be eliminated root and branch.' 

Swann, 402 U.S. at 15. 

Clearly, the evolution of the remedy for segregation does not 

break the causal connection between the 1951 Brown complaint and 

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• 

the Intervenors' action. ~On the . contrary, the basis for this 

evolution has been the Brown proceedings. Thus, it is obvious 

that the Intervenors' action arose out of the Brown lawsuit. 

The second amended complaint, filed by the Intervenors on May 

27, 1986, added a claim for relief pursuant to Title VI of the 

Civil Rights Act of 1964, 42 u.s.c. § 2000d. The School District 

contends that since the Intervenors sought relief pursuant to this 

federal statute, which had not been enacted at the time the 

original Brown proceedings were litigated, the loss incurred by 

the School District in defending the Intervenors' claims under 

this statute could not have arisen out of the prior Brown 

litigation. We disagree. 

As the district court stated in granting the Intervenors' 

motion to intervene, ''[w]hen, as here, a court retains 

jurisdiction over a school desegregation case in order to enforce 

its orders, changes in the law must be applied as they occur." 

Brown, 84 F.R.D. at 401. We therefore reiterate our conclusion 

that the changes in the law since the 1951 Brown complaint do not 

break the causal connection between the original Brown proceedings 

and the Intervenors' action. The Intervenors still sought a court 

order enforcing the 1954 and 1955 mandates of the Supreme Court. 

D. 

The School District maintains that the district court erred 

in failing to consider Continental's actions in providing coverage 

for the defense costs in two actions brought against the School 

District, to wit, Miller v. Board of Education of Topeka, Unified 

School. District No. 501, Case No. 79-1408, and Chapman v. Board 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 43 
.. • 

- of -Education of ~opeka,- Unified School District No. 501, Case No. 

79-1478, both of which were filed in the United States District 

Court for the District of Kansas. Continental reimbursed the 

School District for its defense costs in both of these actions. 

The School District contends that since the claims raised by the 

Intervenors and those raised by the plaintiffs in Miller and 

Chapman were virtually identical, with the exception that the 

Chapman plaintiffs requested money damages in addition to 

injunctive relief, Continental's actions in providing coverage to 

the School District in the Miller and Chapman cases demonstrated 

that Continental did not construe the phrase "arising out of" as 

encompassing claims that the School District had failed to attain 

a unitary system of education following the Brown II decision. We 

disagree. 

The Policy in question specifically states that coverage 

shall be excluded for any loss arising out of prior or outstanding 

litigation. As previously discussed, we hold that the 

Intervenors' action "arose out of" the prior Brown proceedings. 

Whether Continental paid the School District for losses which 

arose in other lawsuits is irrelevant to whether Continental is 

liable to the School District for its losses connected with the 

Intervenors' lawsuit. 

The School District cites Eagle-Picher Industries, Inc. v. 

Liberty Mutual Insurance, 682 F.2d 12, 17-18 (1st Cir. 1982) for 

the following proposition: 

Where, however, the policy terms are ambiguous and the 

coverage issue is reasonably disputed, a court may 

consider extrinsic evidence of the surrounding 

circumstances and of the parties' intent. For example, 

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Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 44 
,I, ~L -

evidence of . the . construction given to the language by 

the parties and of the customary usage of persons in the 

same commercial setting is normally admissible. If the 

meaning of the policy terms remains unclear, the policy 

is generally construed in favor of the insured in order 

to promote the policy's objective of providing coverage. 

(Emphasis added). 

However, as the foregoing quote specifically states, the policy 

terms must be ambiguous before extrinsic evidence is allowed. 

Where the relevant language is unambiguous and the 

application of the policy to the relevant facts is 

clear, that intent must be ascertained by the plain and 

ordinary meaning of the contract language. 

Id. The court in Eagle-Picher simply stated the general rule that 

a court must apply the plain and ordinary meaning of a contract 

when the terms are unambiguous. We hold that the terms of the 

policy were just that; unambiguous. We therefore hold that the 

district court did not err by not considering the prior actions of 

Continental. Moreover, the plaintiffs in both the Chapman and 

Miller cases brought their actions separate from the original 

Brown lawsuits, whereas the Intervenors' action was a continuation 

of the Brown proceedings. 

II 

The School District's final argument is that the undisputed 

facts of this case require that judgment be entered in favor of 

the School District on the issue of coverage. Alternatively, the 

School District submits that inferences favorable to the School 

District can be deduced from the facts and circumstances which 

make summary judgment in favor of Continental improper. In 

applying our foregoing analysis and conclusions, we disagree. 

Since the intervening plaintiffs' case arose out of and was 

related to the ongoing Brown litigation, the 

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School District is 

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 45 
. .. .;. 

not- entitled to -_ recover the .. expenses incurred in defending that 

litigation from Continental. In the present situation, the 

Endorsement's language was plain and unambiguous with a clear 

meaning that prohibits the recovery of this loss. Endorsement No. 

3 excludes the coverage claimed by the School District. We 

therefore hold that summary judgment in favor of Continental was 

proper. 

AFFIRMED. 

-32-

Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

Appellate Case: 89-3097 Document: 01019972551 Date Filed: 04/25/1990 Page: 46