PATRICK R. NICHOLS,
KATHIE S. NICHOLS,
        Plaintiffs,

vs.

AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,
LARRY J. SHIPMAN,
        Defendants.

Defendant Larry Shipman filed a Motion for Summary Judgment on plaintiffs' Amended Claims. Plaintiffs Patrick and Kathie Nichols filed a response and defendant Shipman filed his reply to their response on December 18, 2001. The court now deems Defendant Shipman's Motion for Summary Judgment on the Amended Claims ready for ruling.

1. Plaintiffs are Patrick R. Nichols and his wife Kathie A. Nichols, owners of a home insured by defendant American Family Insurance. First Amended Petition ¶¶ 1, 7. They have sued Larry Shipman, who is the local agent who took the application for the policy, and American Family Insurance Company for damages in excess of $75,000 arising from a claimed loss under a policy of insurance issued in 1988. First Amended Petition, entirety.

2. In the spring of 1999 an underground leak developed in a water main near the Nichols home, which went undiscovered for about 60 days. As a result of the leak thousands of gallons of water were released into the ground. After the leak was discovered and repaired, Mr. and Mrs. Nichols drained their pool for cleaning. About 36 hours later the pool's deep end rose two feet out of the ground, pushed up by the underground water that had leaked from the water main. First Amended Petition ¶¶ 8, 9.

3. Inspection revealed that the swimming pool could not be reinserted into the ground without major effort and expense and substantial excavation. Pat Nichols depo. pp. 76-77. Mr. Nichols originally told American Family in June of 1999 that he would replace the pool. Pat Nichols depo. pp. 76-77. However, the swimming pool has not been replaced. It was removed, the hole was filled in, and grass was planted over the site it occupied. Pat Nichols depo. pp. 86-87.

4. When the home and swimming pool were first purchased by Mr. and Mrs. Nichols in 1988, the pool had a roof over it that was directly connected to the house. Kathie Nichols depo. pp. 8-10. The pool itself was part concrete and part fiberglass, and was built into the ground. Kathie Nichols depo. pp. 6-7.

5. In the spring of 1994 there was a conversation between Pat Nichols and an unidentified person who answered the phone at Larry Shipman's number about coverage for work to remove the roof from the swimming pool. Second amended Petition, pages 2-3 paragraph 7; Kathie Nichols depo. pp. 36-38. In 1994 the structure that had covered the swimming pool in 1988 was being removed by Mr. and Mrs. Nichols. Pat Nichols depo. pp. 13-14, 23-24, 51. The only property risk discussed in 1994 was the possibility that something might be dropped on the pool by the contractors who were removing the roof. Kathie Nichols depo. pp. 55-56; Pat Nichols depo. pp. 124-127, 132. There was no request for new coverage made at the time of the removal work. Pat Nichols depo. pp. 129, 131. There were no discussions about deductibles, coverage limits, or risks unrelated to the removal of the roof. Kathie Nichols depo. pp. 55-56; Pat Nichols depo. pp. 124-127, 132.

6. In 1995 some additional roofing over the patio that surrounded the pool was removed. Second Amended Petition pages 2-3 paragraph 7. From that date the only physical connection between the swimming pool and the house was the underground piping for circulating the water in the pool, an underground electric line, and the paved walkway connecting the pool to the house. Pat Nichols depo. pp. 31, 80-81.

7. There was a conversation and some letters in 1995 about obtaining earthquake coverage. Kathie Nichols depo. pp. 30-32, 39. On June 22, 1995 Patrick Nichols wrote to Larry Shipman asking the "increased coverage" be provided for earthquake damage, and offered to pay an additional premium for such coverage. See Kathie Nichols depo. Exh. 1. On June 30, 1995 he wrote Shipman and again asked for "the addition of earthquake coverage." Kathie Nichols depo. Exh. 2.

8. On July 17, 1995 an assistant to Mr. Shipman wrote to Patrick Nichols to confirm that the requested earthquake endorsement had been added to the policy. The letter contained the following advisory concerning limited coverage amounts:

A special deductible of 2% of the total amount of insurance coverage in force applies. This deductible applies separately to coverage A, coverage B, and to other structures.

Kathie Nichols Depo. Exh. 3. Mr. Nichols testified that he spoke to Shipman about the need for earthquake insurance, and was told that "there was a limit on my coverage." Pat Nichols depo. p. 15. There was no objection from Mr. and Mrs. Nichols to the limited coverage afforded under either the original policy or under the earthquake endorsement. Pat Nichols depo., pp. 109-112. The last discussion with Shipman about property insurance prior to the damage to the swimming pool was the 1995 request for earthquake insurance. Kathie Nichols depo. p. 39; Pat Nichols depo. 132-133. Earthquake insurance was obtained as requested in 1995. Kathie Nichols depo. pp. 30 and 33.

9. One morning in April of 1999 the swimming pool rose part way out of the ground, apparently as a result of an underground water leak. Kathie Nichols depo. pp. 39-46. The pool maintenance contractor was called for assistance, and at his recommendation the drainpipe under the pool was broken to relieve the water pressure. Kathie Nichols depo. pp. 46-47. The rising of the pool had caused parts of an adjacent brick patio to fall underneath it. Kathie Nichols depo. pp. 73-74.

10. The only apparent cause for the damage to the pool was pressure from underground water that had leaked out of a water pipe on the other side of the house. Kathie Nichols depo. pp. 39-46, 68-69. There was no indication of an earth tremor or earthquake when the damage appeared. Kathie Nichols depo. pp. 69-70; Pat Nichols depo. pp. 169-170.

11. The policy of insurance was renewed annually on September 12 of each year. Pat Nichols depo. Exh. 1, page 2. Plaintiffs do not have a copy of the 1988 policy of insurance and do not know what its terms were. Pat Nichols depo. pp. 136, 155-157. The policy produced during discovery uses forms that were revised in 1994. Pat Nichols depo. pp. 134-136. At various times since 1988 American Family has changed some of the terms of their policy, by notifying them directly of changes to take effect upon renewal. Pat Nichols depo. pp. 134-135. Plaintiffs do not contend that Shipman should be responsible for changes made by American Family to its policy forms. Pat Nichols depo. pp. 170-172. Shipman was not involved in the delivery of renewal policies or the collection of premiums. Pat Nichols depo. pp. 172-173.

12. Mr. Nichols read the policy of insurance after he received it in 1988. Pat Nichols depo. p. 10. Before he read the policy he had graduated from Washburn University School of Law, and had taken the course on insurance law while attending that institution. Pat Nichols depo. pp. 7-8. He testified that he understood the policy to provide for either payment of replacement cost or payment of the depreciated cash value of any damaged property, at the option of the insured. Pat Nichols depo. pp. 57-58. He further testified that he understands the language of the 1999 policy to provide replacement cost coverage for the dwelling and any detached garage but that certain parts of the policy did not mention swimming pools. Pat Nichols depo. pp. 146-147. He also understands the 1999 policy to exclude coverage for any loss caused in part by underground water. Pat Nichols depo. pp. 150-152. Mr. Nichols also testified that he understands that the policy requires that proof of replacement be provided before replacement cost coverage will be paid. Pat Nichols depo. pp. 154-155.

13. Without the addition of earthquake coverage American Family's policy provided no coverage for damage to a swimming pool caused by earth rising, shifting, subsiding or contracting, and provided no coverage for any property damage to a swimming pool caused by the pressure of underground water from any source. Pat Nichols depo. Exh. 1, p. 5 of 16, Perils Insured Against ¶ 5 and page 7 of 16, Exclusions ¶¶ 1 and 9. However, the company apparently interpreted its policy differently depending on whether underground water was "natural" or "man-made." See comments of Jim Nordstrom, in P. Nichols depo., pp. 17-18; Transcript of Motion Hearing, September 14, 2000, p. 9; William Klecan letter of October 14, 1999 (Ex. 4 to Second Amended Petition); William Klecan depo., pp. 15, 37.

14. Mr. Nichols has no idea whether any insurance company offered coverage that was not subject to the same exclusions as those set forth in the 1999 American Family policy. Pat Nichols depo. pp. 193-194.

15. Plaintiffs have offered opinion testimony from Mr. Don Holt, a retired State Farm Insurance agent, in support of their claims against Shipman. Mr. Holt has never read the policy issued to Mr. and Mrs. Nichols in 1988, and has no opinions to express concerning the existence or nonexistence of coverage for the swimming pool under the forms used by American Family in 1988 or any other time. Holt depo. pp. 11-12, 22, 44, 75-77.

16. Holt also testified that he would not have volunteered to an applicant that replacement cost coverage would apply to some structures on the premises but not all of them. Holt depo. pp. 45-46. Holt confirmed that if he had been asked whether the incident involving the swimming pool was or was not covered, he would not have expressed an opinion and would instead have asked for advice from his company. Holt depo. pp. 72-74. Holt testified that he would not expect a local insurance agent to explain the effect of the earth movement and underground water exclusions, or to offer earthquake insurance coverage to an applicant for a homeowners policy in Kansas. Holt depo. pp. 29, 39.

17. Holt testified that an agent would have no obligation to review the effect on coverage of any physical change to the insured premises unless he was personally aware that alterations were being made. Holt depo. p. 78. Holt testified that he assumed Shipman personally inspected the house and pool at the time the roof was removed from over the pool in 1994. Holt depo. p. pp. 21-25.

18. Mr. Nichols clearly testified that he did not speak with Larry Shipman in 1994 about the pool project. Pat Nichols depo. at pp. 124-125. Mrs. Nichols believes that someone "from American Family" other than Larry Shipman viewed the premises in 1994. Kathie Nichols depo. at pp. 45-46.

19. Holt specifically testified that he could not criticize Shipman for failing to sit down with Nichols in 1995 when the earthquake endorsement was added to the policy to explain the details of that coverage, and that it was all right to simply mail a letter like the one that was sent to Mr. and Mrs. Nichols advising them of limitations on their coverage. Holt depo. pp. 67-68.

Motions for summary judgment are decided pursuant to K.S.A. 60-256, and will be granted if the pleadings, depositions, answers to interrogatories and admissions, together with any affidavits, show that there is no genuine issue as to any material facts and that the moving party is entitled to judgment as a matter of law. K.S.A. 60-256(c). The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in the light most favorable to the plaintiff. Bacon v. Mercy Hospital at Fort Scott, 243 Kan. 303, 306 (1988). The moving party must prove that there is no genuine issue as to material facts. If factual issues do exist, they must be material to the case to preclude summary judgment. To oppose a motion for summary judgment, a party must come forward with something of evidentiary value to establish a material dispute of fact. Glenn v. Fleming, 247 Kan. 296, 799 P. 2d 79 (1990). A defendant is entitled to summary judgment if the defendant can establish there is an absence of evidence to support plaintiff's case. Crooks v. Greene, 12 Kan. App. 2d 62, 736 P. 2d 78 (1987).

This court previously granted Shipman's Motion for Summary Judgment as to Counts I, III, IV, and V, finding that those claims were time-barred.

Defendant Shipman appears to address some new versions of the claims previously addressed by this court. While those issues presumably have been ruled on by the court and don't appear to be raised by plaintiffs, in an abundance of caution, the court briefly will address the arguments made by defendant that would apply to breach of contract issues by Shipman or issues related to negligent failure to procure coverage or evaluate coverage.

Plaintiffs explicitly state that their claim against Shipman in the amended complaint is not for breach of contract. However, if such an argument emerges regarding any alleged oral agreement in 1994 by Shipman's employee to review plaintiffs' insurance coverage, defendant's statute of limitation argument is applicable because this case was filed more than three years after any possible failure to review the policy would have occurred. The statute of limitation that applies to oral contracts is three years pursuant to K.S.A. 60-512.

Defendant also addressed a potential argument by plaintiffs that the continuing relationship between plaintiffs and defendant tolled the statute of repose. Defendant argues correctly that the statute of repose applies independently of any legal doctrine which might toll a statute of limitation. Morrison v. Watkins, 20 Kan. App. 2d 411, 889 P.2d 140 (1995).

The Second Amended Petition added a new Count VI alleging negligent misrepresentation which has not been ruled on by this court and is the main issue in Defendant's Motion for Summary Judgment. Plaintiffs allege that "[t]he actions of defendant Shipman (through his employee) in 1994 in assuring plaintiffs that they were 'fully covered' constituted negligent misrepresentation of the extent of coverage." Plaintiffs' Second Amended Petition.

Defendant argues that even if plaintiffs received inaccurate information in 1994 regarding full coverage for the pool, plaintiffs had actual knowledge in 1995 that they were not fully covered. In 1995, Mr. Nichols sought and obtained earthquake coverage. At that time, defendant argues that plaintiffs clearly were aware that they did not have full coverage or they would not have sought additional coverage. The knowledge of the falsity of representation, not the later infliction of economic loss, triggers the statute of limitations for misrepresentation. See Waite v. Adler, 239 Kan. 1, 716 P.2d 524 (1986). Therefore, defendant contends that the two year statute of limitation for negligent misrepresentation expired in 1997, at the latest.

Plaintiffs, however, argue that the alleged misrepresentation was not known to them in 1995. Plaintiffs concede that in 1995 they were aware that they did not have coverage for all risks (ie. such as damage from an earthquake) but they contend that they were not aware that they did not have full coverage for the pool for all the risks that were covered.

It seems to this court that plaintiffs are splitting hairs. While it may be quite possible that plaintiffs believed that they had full coverage for all the risks that were not excluded, the notice regarding earthquake coverage in which less than full coverage was going to be added should have put plaintiffs on notice that there might be other areas in which full coverage was not provided.

In addition, the subsequent delivery of any written contract which differed from the parties' understanding of the contract based on the 1994 conversation with the unidentified employee would cause the "injury" of the negligent misrepresentation to become substantially ascertainable.

It is not entirely clear from the uncontroverted statements as to whether plaintiffs annually received a new copy of their insurance policy. Plaintiffs' Exhibit 2, that was provided to the court in the first set of summary judgment motions, is dated June of 1994. Delivery of the copy of the insurance policy would have occurred after the spring, 1994 conversation since the policy form is dated 6/94. Defendant cites the case Cornett v. Roth, 233 Kan. 936, 941, 666 P.2d 1182 (1983) for the proposition that any claim of misrepresentation runs from the date of delivery of the contract document, not from any later date when the parties became aware of the document's contents. While the Kansas Supreme Court does not explicitly state what defendant argues, the Court certainly held in Roth that the provisions of the contract in that case were readily ascertainable at the time the contract was executed and that the cause of action for negligent misrepresentation and/or fraud arose then and not when the plaintiffs discovered that the contract was different from what allegedly had been represented to them. A recent appellate decision confirms that an insured may not claim ignorance of the most basic provisions of a policy of insurance and that an insured must make some minimal effort to read the policy. Jones v. Reliable Security, 29 Kan. App. 2d , 28 P. 3d 1051 (2001). While Mr. Nichols testified that he did read the policy in 1988, it appears to this court the 1988 review did not absolve plaintiffs from any further review of the policy.

This court finds that any misrepresentation by an unidentified employee of Shipman's in 1994 was reasonably ascertainable either in 1995 or when the June, 1994 policy was delivered. In either case, the statute of limitation of two years pursuant to K.S.A. 60-513(4) expired prior to this case being filed.

Therefore, this court grants defendant Shipman's Motion for Summary Judgment as to Count VI. The above constitutes the court's findings of fact and conclusions of law and no further journal entry is required.

IT IS SO ORDERED.

Dated this 28th day of January, 2002.

 
_________________
Nancy Parrish
District Judge, Third Judicial District
Division Fourteen