Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-92-03164/USCOURTS-ca10-92-03164-0/pdf.json

Parties Involved:
Scott E. McIntosh
Appellant
Steven R. McIntosh
Appellant
Scottsdale Insurance Company
Appellee

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

SCOTT E. McINTOSH and 

STEVEN R. McINTOSH, 

Plaintiffs-Appellants, 

FIL .. , . .0 

United States Court of Appea Tenth Ciff!Uit 

APR 2 2 1993 

ROBERT L. HOECKER 

Clerk 

v . No. 92-3164 

SCOTTSDALE INSURANCE COMPANY, 

Defendant-Appellee. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 91 - 1344 - K) 

Jack S . Mcinteer (Randall K. Rathbun, of Depew, Gillen & Rathbun , 

Wichita, Kansas, was with him on the brief), of Depew, Gillen & 

Rathbun, Wichita, Kansas, for the Plaintiffs-Appellants. 

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

the Defendant-Appellee . 

Before TACHA, McWILLIAMS, and BALDOCK, Ci rcuit Judges. 

TACHA, Circuit Judge . 

Appellate Case: 92-3164 Document: 010110212840 Date Filed: 04/22/1993 Page: 1 
In this garnishment action, Scott McIntosh and his father, 

Steven McIntosh, appeal from a district court order denying their 

motion for summary judgment and granting Scottsdale Insurance 

Company ( "Scottsdale") its motion for summary judgment. The 

district court held that Scottsdale does not owe the City of 

Wichita, Kansas ( "Wichita") coverage for a tort judgment that the 

Mcintoshes won against Wichita. We exercise jurisdiction under 28 

U.S.C. § 1291 and reverse. 

I . BACKGROUND 

This case arose when Scott McIntosh suffered injuries from a 

fall on the premises of Wichita's Century II convention facilities 

during the 1988 Wichita River Festival. Wichita Festivals, Inc. 

("Festivals"), a nonprofit corporation, runs the annual festival 

as Wichita's official representative pursuant to a city ordinance. 

See Wichita, Kan . , Code of the City§§ 3.14010-.050 (1985). While 

attending a street dance sponsored by Festivals, Scott sought one 

of the portable toilets Festivals provided for its patrons in an 

effort to answer the call of nature. Feeling the urgency of that 

call, he left the public pathway to take a more direct route and 

encountered a low retaining wall which separated the pathway from 

the entrance to Century II's underground garage. Scott jumped 

over the wall, fell approximately twenty feet, and suffered 

several injuries. 

The Mcintoshes sued Wichita in state court, alleging that 

Scott's injuries were caused by the city's failure to warn of a 

dangerous condition. Wichita tendered defense of the suit to 

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Festival's liability insurer, Scottsdale, because Wichita is an 

additional insured under Festivals' policy. After Scottsdale 

denied coverage, Wichita tendered the defense to its general 

liability insurer, Hanover Insurance Co. ("Hanover" ) , which 

accepted the tender. Before the case went to trial, Wichita 

agreed to stipulate that it was 100% at fault. In return, the 

Mcintoshes agreed not to execute against Wichita's assets and to 

release Hanover from any claims growing out of the accident . The 

case was tried on damages only, and judgment was entered against 

Wichita for $74,571.15 plus costs. 

The Mcintoshes then filed a garnishment action in state court 

against Scottsdale, alleging that Scottsdale owed Wichita coverage 

for the tort judgment. Scottsdale removed the case to the United 

States District Court for the District of Kansas. Following 

discovery, the parties filed cross-motions for summary judgment 

relying on essentially the same facts. The Mcintoshes argued that 

Scottsdale is liable for the tort judgment under two separate 

provisions in Festivals' liability policy . First, they argued 

that the endorsement which names Wichita as an additional insured 

covers Wichita for all liability arising out of the festival, 

including liability based on Wichita's own negligence. Even 

assuming, as Scottsdale contended, that the endorsement itself 

provides coverage only in cases where Wichita is vicariously 

liable for Festivals' negligence, the Mcintoshes argued that the 

p olicy still provides coverage because it is controlled by a city 

ordinance that allegedly requires Festivals to purchase insurance 

covering Wichita for its own negligence . 

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Second, they argued that Scottsdale owes coverage to 

Festivals because the same city ordinance also allegedly requires 

Festivals to indemnify Wichita for its own negligence. Although 

the policy contains a contractual liability exclusion, an 

"incidental contracts" clause excepts from the exclusion liability 

based on agreements to indemnify a municipality. The Mcintoshes 

argued that because Festivals must indemnify Wichita and because 

the policy covers Festivals for such indemnification, Scottsdale 

ultimately owes Wichita the amount o f the underlying tort 

judgment . 

The district court examined the language of the additional 

insured endorsement and concluded that it does not cover Wichita 

for its own negligence . It further concluded that, assuming that 

the ordinance could override the policy, the ordinance does 

nothing to amend the policy because it does not require Festivals 

to obtain insurance covering Wichita for its own negligence . 

Finally, because the ordinance does not require Festivals to 

indemnify Wichita for its own negligence, the court held that the 

Mcintoshes cannot prevail under the incidental contracts clause . 

It therefore granted Scottsdale's motion for summary judgment and 

denied the Mcintoshes' cross-motion, including their request for 

attorneys fees. McIntosh v . Scottsdale Ins. Co., 789 F . Supp. 

1126 (D . Kan. 1992). This appeal followed. 

II. STANDARD OF REVIEW 

We review summary judgment orders de novo, using the same 

standards the district court applies. Osgood v. State Farm Mut. 

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Appellate Case: 92-3164 Document: 010110212840 Date Filed: 04/22/1993 Page: 4 
Auto . Ins. Co., 848 F.2d 141, 143 (10th Cir. 1988). Sununary 

judgment is appropriate "if the pleadings, depositions, answers to 

interrogatories, and admissions on file, together with the 

affidavits, if any, show that there is no genuine issue as to any 

material fact and that the moving party is entitled to a judgment 

as a matter of law." Fed. R. Civ. P. 56(c); see Anderson v. 

Liberty Lobby. Inc., 477 U.S. 242, 247-48 (1986). Ordinarily, the 

denial of the Mcintoshes' motion for sununary judgment would not be 

an appealable final order. See Schmidt v. Farm Credit Servs., 977 

F.2d 511, 513 n.3 (10th Cir. 1992). Where we reverse a sununary 

judgment order in favor of one party, however, we will review the 

denial of the other part~ cross-motion for sununary judgment 

under the same standards applied by the district court so long as 

it is clear that the party opposing the cross-motion had an 

opportunity to dispute the material facts. Id.; cf. Buell Cabinet 

Co .• Inc. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979). In this 

diversity case, we ascertain and apply Kansas law such that we 

reach the result that would be reached by a Kansas court. See 

Adams-Arapahoe Sch. Dist. No. 28-J v. GAF Co:r:p., 959 F.2d 868, 870 

(10th Cir. 1992) . We review de novo the district court's rulings 

with respect to Kansas law. See Salve Regina College v. Russell, 

111 S. Ct . 1217, 1221 {1991) . 

III. DISCUSSION 

The Mcintoshes contend that the district court erred because 

(1) the additional insured endorsement provides coverage for 

Wichita's own negligence; (2) the city ordinance controls the 

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Scottsdale policy and amends it to cover Wichita for its own 

negligence; and (3) the city ordinance requires Festivals to 

indemnify Wichita for its own negligence so that Scottsdale 

ultimately owes Wichita under the incidental contracts clause. 

Because we agree that the policy itself covers Wichita as an 

additional insured, and because Scottsdale had a fair opportunity 

to dispute all the material facts, we reverse the district court 

and order it to enter judgment in favor of the Mcintoshes. 

The additional insured endorsement provides: 

The "Persons Insured" provision is amended to include as 

an insured the person or organization named below but 

only with respect to liability arising out of operations 

performed for such insured by or on behalf of the named 

insured. 

Festivals is the named insured. Wichita is named as an additional 

insured. The district court interpreted the phrase "arising out 

of the operations performed . .. by .. . the named insured" to 

mean arising from Festivals' negligence, thereby excluding 

coverage for Wichita's negligence. Put another way, the court 

concluded that the plain language of the endorsement unambiguously 

covers Wichita only to the extent that it is held vicariously 

liable for Festivals' negligence. We disagree. 

In Kansas, the construction of an insurance policy is a legal 

determination subject to de nova review. Farm Bureau Mut. Ins. 

Co . v . Old Hicko ry Casualty Ins. Co., 810 P . 2d 283, 285 (Kan. 

1991 ) . Accordingly , we review the district court's determination 

by applying the Kansas rules of insurance contract interpretation 

and c onstruction. The Kansas Supreme Court recently summarized 

t hose rules: 

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To be ambiguous, a 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 

generally uncertain which one of the two or more 

meanings is the proper meaning. The language of a 

policy of insurance, like any other contract, must, if 

possible, be construed in such manner as to give effect 

to the intention of the parties. Where the terms of a 

policy of insurance are ambiguous or uncertain, 

conflicting, or susceptible of more than one 

construction, the construction most favorable to the 

insured must prevail. Since the insurer prepares its 

own contracts, it has a duty to make the meaning clear. 

If the insurer intends to restrict or limit coverage 

provided in the policy, it must use clear and 

unambiguous language in doing so; otherwise, the policy 

will be liberally construed in favor of the insured. 

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. 

Id. at 285-86 . As an alternative to the rule of liberal 

construction of ambiguous terms, the Kansas courts sometimes apply 

the related doctrine of "reasonable expectations." See Penalosa 

Coop . Exch . v . Farmland Mut . Ins. Co., 789 P.2d 1196, 1198 (Kan. 

Ct. App. 1990 ) . Under that doctrine, "[w]here the terms are 

ambiguous, the policy shall be construed to mean what a reasonable 

person in the position of the insured would have understood them 

to mean." House v . American Family Mut. Ins. Co., 837 P.2d 391, 

397 (Kan. 1992); see also Robert I . Keeton & Alan L. Widiss, 

Insurance Law§ 6.3, at 633 (1988) ("In general, the courts will 

protect the reasonable expectations of applicants, insureds, and 

intended beneficiaries regarding the coverage afforded by 

insurance contracts • II ) • 

Applying these rules to the additional insured endorsement, 

we conclude that it covers Wichita for the tort judgment . At 

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best, the phrase "but only with respect to liability arising out 

of [Festivals'] operations" is ambiguous as to whose negligence is 

covered and whose negligence is excluded from coverage. Because 

this ambiguous language purports to limit coverage, we must 

construe it narrowly. Id. at 286; Arnold v. Adventure Line Mfg. 

Co., 495 P. 2d 1007, 1011 (Kan. 1972) ( "That liability which is not 

clearly excluded from coverage under a general comprehensive 

liability insurance contract is presumed to have been included."). 

Although the Kansas courts have not addressed the precise language 

before us, we believe that the Kansas courts, like courts in other 

jurisdictions that liberally construe ambiguous insurance policy 

provisions in favor of the insured, would conclude that the 

additional insured endorsement does not limit the policy's 

coverage to cases where Wichita is held vicariously liable for 

Festivals' negligence. See, e.g., Philadelphia Elec. Co. v. 

Nationwide Mut. Ins. Co., 721 F. Supp. 740, 742 (E.D. Pa. 1989) 

(holding that clause adding additional insureds "for any work 

performed by [the named insured] on their behalf" covered 

additional insureds for their own negligence related to work of 

named insured); Casualty Ins. Co. v. Northbrook Property & 

Casualty Ins . Co., 501 N.E.2d 812, 815 (Ill. App. Ct. 1986 ) 

(holding that phrase "arising out of operations performed for the 

additional insured by the named insured" covered additional 

insured for its own negligence); Dayton Beach Park No. 1 Cor:p. v. 

National Union Fire Ins. Co . , 573 N. Y. S.2d 700, 701 (N.Y. App. 

Div.) (holding that phrase "arising out of . . . operations 

performed for the additional insured by the named insured" 

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Appellate Case: 92-3164 Document: 010110212840 Date Filed: 04/22/1993 Page: 8 
covered additional insured for its own negligence), appeal denied, 

586 N.E.2d 62 (N.Y. 1991). As the Philadelphia Electric court 

stated, "[i]f the parties had intended coverage to be limited to 

... vicarious liability . , language clearly embodying that 

intention was available." 721 F. Supp. at 742. 1 

1 Scottsdale's reliance on Harbor Insurance Co. v. Lewis, 562 

F. Supp. 800 (E.D. Pa. 1983), and Czajhowski v . City of 

Philadelphia, 537 F. Supp. 30 (E.D. Pa. 1981), aff'd, 688 F.2d 619 

(3d Cir. 1982), is misplaced. In Harbor, the court found that 

"[i]n the insurance industry, additional insured provisions have a 

well established meaning. They are intended to protect parties 

who are not named insureds from exposure to vicarious liability 

for acts of the named insured." 562 F.2d at 803. We do not 

consider this passage persuasive because it was a fact finding 

based on expert testimony before the Harbor court and not part of 

the record before us. See id. More importantly, the court was 

interpreting a clause that specifically provided that the policy 

only covered the additional insured "to the extent of liability 

resulting from occurrences arising out of negligence" of the named 

insured. Id. at 802. As the court later stated in Philadelphia 

Electric, the Harbor court did not "articulate a rule of law 

limiting the interest of an additional insured on a comprehensive 

general liability policy to those cases in which it is vicariously 

liable for the acts of the primary policyholder." 721 F . Supp . at 

742. 

Czajhowski is also inapposite. The court there examined the 

language of a private contract of indemnity between the city of 

Philadelphia and a concessionaire at the city's civic center, 

rather than an insurance policy. The court concluded that the 

phrase "arising out of or relating to the concessionaire's 

occupancy of the premises" did not cover the city for its own 

negligence because it failed to contain express language to that 

effect. 537 F. Supp. at 31-32 . The court thus applied the 

general rule, also followed in Kansas, that private contracts of 

indemnity are to be strictly construed agai nst the indemnitee. 

See, e . g., Elite Professionals, Inc . v . Carrier Corp . , 827 P.2d 

1195, 1202 - 03 (Kan. Ct. App. 1992) . As we discuss above, however, 

the Kansas courts apply precisely the opposite rule when 

construing insurance policies. See, e.g., Farm Bureau, 810 P . 2d 

at 286; see also Pickhover v . Smith's Management Corp., 771 P . 2d 

664, 668 & n.3 (Utah Ct . App. 1989) (recognizing that the general 

rules for construing private contracts of indemnity and insurance 

policies achieve opposite results), cert. denied, 795 P . 2d 1138 

(Utah 1990 ). 

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We further conclude that Wichita's liability "arose out of" 

Festivals' operations. The phrase "arising out of" clearly 

relates to causation, but its tenns are "both broad and vague." 

Casualty Ins., 501 N.E.2d at 814. The Kansas courts have held 

that this ambiguous phrase "imparts a more liberal concept ... 

than 'proximate cause,'" see Pestock v. State Fann Auto . Ins. Co ., 

674 P.2d 1062, 1063 (Kan. Ct. App. 1984). Although a remote 

connection between Festivals' operations and Scott's injuries 

would not suffice, see, e.g., Fann Bureau Mut . Ins. Co., Inc . v. 

Evans, 637 P . 2d 491, 494 (Kan. Ct. App . 1981) (rejecting strict 

"but for causation"), we conclude that the facts of this case 

clearly demonstrate the requisite causal connection. It is 

undisputed that Scott McIntosh was injured while walking from a 

dance sponsored by Festivals to the portable toilets set up by 

Festivals. Under these circumstances, a reasonable insured in 

Wichita's position would understand that Scott's injuries, and 

Wichita's liability, "arose out of" Festivals' operations. See 

Penalosa Coop . Exch., 789 P.2d at 1198 (describing doctrine of 

reasonable expectations). Therefore, we hold that Scottsdale owes 

Wichita coverage for the tort judgment as a matter of law. 

Our disposition of the case makes it unnecessary to decide 

whether the ordinance amends the additional insured endorsement2 

2 Even if the ordinance did not require Festivals to procure 

insurance covering Wichita for its own negligence, Festivals could 

purchase broader coverage than that required by the statute. See 

Bell, 790 P . 2d at 929. Courts enforce insurance policy provisions 

that provide coverage beyond the requirements of statutes or 

contracts to procure insurance. See. e.g., State v. Underwriters 

at Lloyd's. London, 755 P.2d 396, 400 & n.8 (Alaska 1988 ) ; Heat & 

Powe r Corp . v. Air Prods. & Chems . , Inc . , 578 A. 2d 1202, 1207-08 

(Footnote Continued on Next Page) 

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Appellate Case: 92-3164 Document: 010110212840 Date Filed: 04/22/1993 Page: 10 
or whether the Mcintoshes could prevail under the incidental 

contracts clause. We therefore REVERSE the order granting 

Scottsdale's motion for summary judgment and denying the 

Mcintoshes' cross-motion for summary judgment and REMAND with an 

order to enter summary judgment on the garnishment claim in favor 

of the Mcintoshes and conduct a hearing on the Mcintoshes' request 

for attorneys' fees. 

(Footnote Continued from Previous Page) 

(Md. 1990 ) ; Long Island Lighting Co. v. American Employers Ins. 

Co., 517 N.Y.S.2d 44, 45 (N.Y. App. Div. 1987) . 

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