Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-03211/USCOURTS-ca10-89-03211-0/pdf.json

Nature of Suit Code: 350
Nature of Suit: Motor Vehicle Personal Injury
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

FI LED 

United States Cour:t of Appeals 

Tenth Circuit 

Al)!~ 2 ·1 1990 

ROBERT L. 1-IOECKER 

Clerk 

GREAT WEST CASUALTY COMPANY, ) 

) 

) 

) 

) 

) 

) 

) 

) 

Plaintiff-Appellee, 

v. No. 89-3211 

CANAL INSURANCE COMPANY, 

Defendant-Appellant. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 85-4094) 

Stephen M. Kerwick of Foulston & Siefkin, Wichita, Kansas, for 

Defendant-Appellant. 

Deborah T. Carney (David w. Steed and Robert J. Nugent on the 

brief) of Turner ·and Boisseau, Wichita, Kansas, for 

Plaintiff-Appellee. 

Before BRORBY, EBEL, Circuit Judges, and JOHNSON,* District Judge. 

*Honorable Alan B. Johnson, District Judge, United States District 

Court for the District of Wyoming, sitting by designation. 

PER CURIAM. 

Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 1 
This diversity action was brought by one insurance company 

seeking equitable contribution from another insurance company, and ~ 

it presents two issues. First, whether Kansas law recognizes 

equitable contribution claims independent of subrogation theory in 

the context of statutorily required minimum insurance coverage for 

liability to a third party; and second, whether the liability of a 

carrier with a st~tutorily invalid exclusion of liability to 

occupants is deemed to be limited to the same liability as the 

minimum coverage prescribed by Kansas statute. We hold that under 

Kansas law, equitable contribution is independent of subrogation 

principles in these circumstances, and further, that a statutorily 

prohibited exclusion is void only to the extent of the minimum 

coverage required by the statute. 

This declaratory judgment action was submitted to the 

district court on stipulated facts. We draw liberally from the 

district court's description of these facts. Great w. Casualty 

Co. v. Canal Ins. Co., 706 F. Supp. 761, 762-64 (D. Kan. 1989), 

amended on reconsideration, No. 85-4094-R, 1989 WL 88076 (D. Kan. 

July 26, 1989). On May 11, 1985, a tractor trailer rig owned by 

Mangold Trucking was involved in a single-vehicle accident in 

Logan County, Kansas. As a result of the accident, Teresa 

Munkres, a passenger in the Mangold Trucking truck, was killed. 

Both plaintiff-appellee Great West Casualty Co. (Great West) and 

defendant-appellant Canal Insurance Co. (Canal) had issued 

automobile liability policies to Mangold Trucking which were in 

effect at the time of the accident. 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 2 
Munkres' spouse and minor child claimed damages against 

Mangold Trucking, which Great West settled and paid. Great West 

then sought contribution from Canal of one-half of the settlement 

amount plus one-half of the personal injury protection (PIP) 

benefits and one-half of the fees, costs, and expenses. 

The policies issued by Great West and Canal were similar in 

some respects. Pertinent to this case, both policies provided for 

pro rata payments from the issuer, in the same proportion that the 

policies' coverage limits bore to the total liability coverage 

provided by the combination of policy coverages. Both policies 

limited liability coverage to $500,000 per occurrence. 

However, the Canal policy contained an occupant hazard 

exclusion which was not part of the Great West policy. 

denied liability for contribution based on this exclusion: 

ENDORSEMENT 

OCCUPANT HAZARD EXCLUDED 

It is agreed that such insurance as is afforded by the 

policy for Bodily Injury Liability does not apply to 

Bodily Injury including death at any time resulting 

therefrom, sustained by any person while in or upon, 

entering or alighting from the automobile. 

It is further agreed that, in the event the company 

shall, because of provision of the Federal or State 

statutes become obligated to pay any sum or sums of 

money because of such bodily injury or death resulting 

therefrom, the insured agrees to reimburse the company 

for any and all loss, costs and expenses paid or 

incurred by the company. 

Canal 

R. tab 26, ex. A at 23 (referred to herein as the occupant 

exclusion). 

In the district court, Canal argued that the occupant 

exclusion precludes coverage for the Munkres' claim. Great West 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 3 
responded that the exclusion was null and void due to mandated 

coverage under the Kansas Automobile Injury Reparations Act, Kan. 

Stat. Ann. §§ 40-3101 through -3121 (1986 & Supp. 1989) (KAIRA). 

Canal countered with the argument that Great West's claim was 

derived from its insured, and that since Mangold Trucking was 

responsible to reimburse Canal for any payments made under the 

exclusion, Great West could derive no greater rights than Mangold 

Trucking would receive. In the alternative, Canal argued that it 

should not be held liable for fifty percent of the claim, as 

demanded by Great West. Its position on this second issue was 

that if the KAIRA was deemed to impose liability on Canal, Canal's 

liability should be limited to the $100,000 minimum coverage under 

the statute. Under this argument, Canal would- be liable for 

one-sixth of the claim pursuant to its pro rata share of the total 

available coverage ($500,000 (Great West) plus $100,000 (Canal), 

totalling $600,000). In addition, Canal argued in the district 

court that it should not be liable for Great West's attorneys' 

fees, costs or administrative expenses but only its pro rata share 

of the Munkres' claim itself. 

The district court found in favor 

issues. It rejected Canal's attempt 

of 

to 

Great 

apply 

West on all 

the equitable 

principle of subrogation to avoid coverage, finding no support for 

such application in Kansas law. Great West, 706 F. Supp. at 764. 

It noted that the exclusion was ineffective as to third party 

actions as "an impermissible 

mandated by the [KAIRA]." Id. 

attempt to dilute the coverage 

The court held that the exclusion 

was ineffective in an action for equitable contribution by another 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 4 
insurer, just as it would be in a direct claim under the policy. 

Id. at 764-65. ~ 

In addition, the court rejected ·as "inequitable'' Canal's 

argument that it should pay only one-sixth of the claim, id. at 

765-66, reasoning that" the limitation of KAIRA coverage to KAIRA's 

minimum level was not "clearly and specifically set forth in 

[Canal's] policy.~ Id. at 766 (relying on DeWitt v. Young, 229 

Kan. 474, 625 P.2d 478, 483 (198l)("We do, however, caution that 

the limited application of such exclusions should be clearly and 

specifically set forth in the policy."). 

And finally, the court ordered Canal to contribute one-half 

of the liability claim, one-half of the PIP claim, one-half of the 

attorney's fees incurred in reaching the settlement and one-half 

of the costs and administrative expenses involved with the 

settlement. While Canal resisted paying any portion of the fees, 

costs or expenses, the court ordered it to do so "based on 

equitable considerations." Great West, 706 F. Supp. at 766. 

Five months later, in an unpublished memorandum and order on 

Canal's motion for reconsideration, the court vacated the portion 

of its order awarding Great West one-half of the attorney's fees 

and administrative costs and expenses. The court was persuaded by 

the holding of Maryland Casualty Co. v. American Family Insurance 

Group, 199 Kan. 373, 429 P.2d 931 (1967). In Maryland Casualty, 

the primary insurer had refused to defend and the secondary 

insurer defended under policy coverage coextensive to that of the 

primary insurer. The court refused to grant the secondary insurer 

contribution from the primary insurer for fees, costs and expenses 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 5 
incurred in defending the insured, ruling that the secondary 

insurer had a duty to defend the lawsuit, and that such duty was 

personal and distinct from indemnification from the primarily 

liable insurer, notwithstanding the coextensive relationship 

between the insured and the primarily liable insurer. Id. at 942. 

On appeal, Canal does not contest responsibility for one-half 

of the PIP payment, but only requests review of the district 

court's imposition of one-half of the third party liability claim 

settlement. This is a question of law, which we review de nova. 

Lilly v. Fieldstone, 876 F.2d 857, 858 (10th Cir. 1989). 

We agree with the district court that Canal's insurance 

policy could not abrogate Canal's responsibility under the clear 

and mandatory requirements of the KAIRA. As an initial matter, we 

note that the district court correctly began its analysis of 

equitable contribution between co-insurers with the requirement 

that the interests covered must be common to both insurers. 

American States Ins. Co. v. Hartford Accident & Indem. Co., 218 

Kan. 563, 545 P.2d 399 (1976). In American States, the court 

held: 

The doctrine of equitable contribution has long 

been recognized by this court as a remedy available to 

one who is compelled to bear more than his fair share of 

a common burden or liability to recover from the others 

their ratable proportion of the amount paid by him. It 

is a principle of equity applicable only where the 

situations of the parties are equal under a common 

liability or burden. Between insurers, it is generally 

a prerequisite to enforcing contribution that their 

policies insure the same interests. 

Id. at 407 (citations omitted); see also Great w. Casualty Co. v. 

Truck Ins. Exch., 358 F.2d 883, 886 (10th Cir. 1966). 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 6 
We also agree with the district court concerning Canal's 

responsibility for an equitable contribution to the settlement. 

Canal's attempt to circumvent its liability to a third party 

claimant by superimposing a circuitous route of subrogation 

through the insured to the primary insurer is contrary to the 

authority of Kansas law. The Kansas Court of Appeals has 

explicitly held: "The doctrine [of equitable contribution] is 

distinct from subrogation and does not depend on privity of 

contract." Midwest Mut. Ins. Co. v. Farmers Ins. Co., 3 Kan. App. 

2d 630, 599 P.2d 1021, 1023 (1979). 

However, as to the computation of each insurer's pro rata 

share, the district court should have imposed only one-sixth of 

the burden on Canal. 

The Kansas Supreme Court provided clear guidance for this 

computation in the case of DeWitt v. Young, 229 Kan. 474, 625 P.2d 

478 (1981). In that case, an exclusion held to be void under the 

KAIRA was held void only to the extent of the minimum statutory 

coverage. The court stated that: 

Generally, it is held that exclusions in liability 

insurance policies are valid and enforceable as to 

amounts exceeding coverage required in financial 

responsibility laws. We adhere to this general rule and 

find the exclusions void only as to the minimum coverage 

required by statute. 

Id. at 483 (citations omitted); see also Ohio Casualty Ins. Co. v. 

State Farm Auto. Ins. Co., 601 F. Supp. 345, 349 (D. Kan. 

1984)(applying Kansas Law). The district court relied on language 

from DeWitt admonishing insurance companies to clearly set forth 

the statutory minimum in the policy so that the insured will be 

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Appellate Case: 89-3211 Document: 01019626789 Date Filed: 04/27/1990 Page: 7 
fully informed as to the extent of~the exclusion from coverage. 

DeWitt, 625 P.2d at 483. However, we find that this admonition is 

dictum in light of the DeWitt court's holding because the omission 

of the statutory minimum in the exclusion would not lessen the 

insured's actual statutory coverage under the holding of the 

court. 

The KAIRA proyides a statutory minimum coverage for motor 

carriers of $100,000. Under DeWitt, this amount also defines the 

maximum sum for which the occupant exclusion in Canal's policy is 

voided by the statutory requirements. Canal is thus liable for 

one-sixth of the Munkres' settlement, which the district court 

shall compute on remand. 

The Memorandum and Order of the district court, published at 

706 F. Supp. 761 (D. Kan. 1989), as modified by Memorandum and 

Order filed July 26, 1989, is AFFIRMED in part and REMANDED in 

part, consistent with this opinion. 

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