Shelter Mutual Insurance v. Williams

Citations: 804 P.2d 1374; 248 Kan. 17; 1991 Kan. LEXIS 25Docket: 62879

Court: Supreme Court of Kansas; January 18, 1991; Kansas; State Supreme Court

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Shelter Mutual Insurance Company initiated a declaratory judgment action to clarify coverage under a homeowners insurance policy that excludes "bodily injury or property damage expected or intended by an insured." The case arose from a shooting incident on January 21, 1985, where James Alan Kearbey, a 14-year-old, entered Goddard Junior High School armed with an M-1A rifle and a .357 magnum handgun. During the incident, Kearbey shot and killed principal James McGee and wounded students Daniel B. Williams and Don Harris, among others.

Kearbey, described as an intelligent yet troubled teenager, had been receiving counseling for emotional issues and had a history of conflicts at school. The evening before the shooting, he made threats about violence to a friend, expressing a desire to shoot a teacher. On the day of the shooting, he exhibited signs of confusion and aggression, and despite not recalling the events during the shooting, he had previously indicated a desire to retaliate against those who bullied him.

Expert testimony from Dr. Gary Hackney, Kearbey's psychologist, revealed that Kearbey experienced a brief reactive psychosis during the incident, leading to a disconnection from reality. Hackney noted that Kearbey entered the school with a goal but lost control when he did not find his intended targets. The case centers on the intent behind Kearbey's actions and the implications for insurance coverage under the policy held by his guardians.

Daniel Williams and Don Harris initiated a lawsuit for damages against Kearbey, his parents, and the Goddard school system. Kearbey's parents sought coverage and defense under their homeowners insurance policy, which excluded coverage for bodily injury or property damage that was expected or intended by the insured. Following the filing of the damages action, Shelter filed a declaratory judgment action on May 29, 1986, to ascertain whether Kearbey's actions fell under this exclusion. Kearbey, having been committed as a juvenile offender to the Kansas Department of Social and Rehabilitation Services (SRS), was served at the Youth Center in Topeka. 

On October 29, 1986, Kearbey's parents requested the appointment of a guardian ad litem, which was granted by the district court, allowing compensation from SRS funds. SRS made a special appearance to amend the order, citing issues such as lack of notice and personal jurisdiction, but their motion was denied. When Shelter sought to designate an agent for service of process on Kearbey, the court ruled that service on Dr. Harder (SRS Secretary) and the guardian ad litem was sufficient.

Subsequently, the guardian ad litem withdrew, and the court appointed Andrew Fletcher, ordering Shelter to cover costs if Kearbey prevailed, while SRS would cover costs if he did not. Kearbey remained under representation by the guardian ad litem even after turning 18 on July 26, 1988. The trial commenced on August 16, 1988, with the jury determining that Kearbey had expected or intended bodily injury to the plaintiffs, leading to a judgment for Shelter with no coverage or obligation to pay damages. Kearbey and SRS appealed, with Kearbey arguing that the court erred by not adopting the majority rule regarding the mental capacity of the tortfeasor affecting insurance coverage and that the jury instructions about his mental state were erroneous.

The key issue at hand is whether the district court had personal jurisdiction over SRS to mandate payment of guardian ad litem fees. The Court of Appeals upheld the district court's finding regarding Shelter's duty, adopting a 'minority view' that considers an injury by a mentally ill person as 'intentional' if the perpetrator understands the physical consequences and intends the harm, despite an inability to distinguish right from wrong. The Court of Appeals ruled the district court erred in ordering SRS to pay the fees due to lack of personal jurisdiction.

In a related case involving the Kearbeys, who were sued by Daniel Williams and Don Harris, Shelter provided defense to the Kearbeys under a reservation of rights, suspecting potential exclusion from coverage due to an insurance policy clause that excludes expected or intended bodily injury or property damage. The jury found Kearbey 80% at fault for the injuries but deemed his parents not at fault, also concluding that Kearbey was insane during the incident. 

The district court denied Kearbey's request for jury instructions on insanity tests, which the Court of Appeals supported, ruling that injuries from a tortfeasor lacking mental capacity do not automatically exempt them from insurance coverage under the intentional injury exclusion. The central question for the court is whether this exclusion applies to an insured who is mentally ill when committing acts of violence. 

Shelter contends that the standard of review is akin to assessing a jury verdict, arguing that if the evidence supports the jury’s finding, it should remain undisturbed. However, the application of the exclusion clause concerning acts by an insane insured is a legal question, warranting unlimited appellate review. 

Kansas law holds that an insane person remains civilly liable for torts (Williams v. Kearbey), reaffirming the principle that liability is imposed on the insane to protect innocent victims, as established in Seals v. Snow, which asserted that an insane person is civilly liable for damages caused by their actions.

In the case of Seals, Snow shot and killed Arthur Seals, leading to a wrongful death lawsuit from Seals' widow. The jury found that Snow did not act in self-defense, was insane at the time of the shooting, and could not distinguish right from wrong. The court emphasized that public policy supports holding individuals liable for their actions, even if they are insane, to ensure that the burden of loss falls on the responsible party rather than the innocent victim. This liability also serves as a deterrent against potential abuse of insanity defenses in tort cases. 

While Kansas law establishes that an insane person can be civilly liable for torts, the implications of insanity on insurance policy exclusions for intentional injuries remain unclear. Contracts must be construed against the drafter, favoring clear language and interpretations that benefit the insured. Previous case law, such as Gowing and Thomas, demonstrates that exclusions for intentional acts in insurance policies can be ambiguous and are strictly interpreted against insurers. In Thomas, the court ruled that an insured who intentionally aimed and fired a gun at close range was excluded from coverage under a policy that barred injuries expected or intended by the insured. The court held that a person is presumed to intend the natural consequences of their actions, although this presumption can be rebutted in cases where the individual lacks the capacity to understand their actions, such as children or those who are insane. Kearbey argues that this principle should apply to exclude insurance coverage for intentional torts only when the insured has the capacity to understand the consequences of their actions.

The court examined the application of an insurance policy's exclusion for expected or intended injuries, referencing Bell v. Tilton, where a juvenile's action of shooting a BB gun was deemed intentional despite the shooter’s claims of no intent to harm. The court established that the act of shooting was inherently likely to cause injury, thereby supporting the trial court's ruling that the act was intentional. Shelter Insurance contended that Alan Kearbey intended to cause harm when he fired loaded firearms at a school, countering the defense’s argument regarding Kearbey's mental state. The jury determined Kearbey's intent based on evidence that he was manipulative, knowing, and had premeditated responses to accusations of insanity. The jury was instructed that intent could be inferred from circumstances and that the burden of proof lay with Shelter to demonstrate Kearbey's acts were intentional. The defense had the burden to prove that Kearbey's mental state negated his ability to form intent. The distinction between liability for intentional acts and insurance policy exclusions for intentional torts was noted.

In Rajspic v. Nationwide Mut. Ins. Co., the Idaho Supreme Court analyzed the relevance of a person's mental state, particularly regarding intentional torts and insurance coverage exclusions. The court clarified that a finding of insanity does not automatically exempt an insurance company from liability for intentional torts. It emphasized that a person deemed insane might still possess the intent to commit tortious acts, even if that intent arises from delusions. The court distinguished between the treatment of intentional torts and the application of insurance exclusion clauses, noting that they are governed by different legal principles.

Two conflicting legal perspectives from other jurisdictions were highlighted. One perspective holds that acts by an insured suffering from mental illness should not be classified as 'intentional' under insurance exclusions, as such exclusions are intended to prevent financial gain from causing harm. The second perspective posits that if a mentally ill person understands the nature and consequences of their actions and intends to cause injury, those actions can be deemed 'intentional' for coverage purposes, regardless of their ability to distinguish right from wrong.

The court also referenced the M'Naghten rule, which is applied in criminal law to assess legal insanity. This rule includes two criteria: whether the individual comprehends the nature and quality of their actions, or if they understand their actions but cannot recognize them as wrongful. The implications of these definitions were considered in relation to insurance liability and the mental capacity of the insured.

Under the minority view articulated by Kearbey, coverage under an insurance policy would only be excluded if the tortfeasor lacks the understanding of the nature and quality of their actions. For instance, if a tortfeasor is aware they are shooting someone but believes it is justified due to a delusion, coverage would be denied. Kearbey argues this interpretation undermines the intent behind insurance exclusions and the standard construction of insurance contracts, suggesting it is illogical to deny coverage based on auditory hallucinations while allowing it when the individual is unaware of their actions entirely. The Virginia Supreme Court, in the case of Johnson, rejected a similar argument, emphasizing that the law does not allow for a simultaneous state of partial normalcy and substantial abnormality in the mind. The court referenced the M'Naghten Rule, distinguishing between those who do not understand the nature of their actions and those who do but fail to recognize them as wrongful due to mental illness. In the specific case examined, Davis was found to have acted with clear awareness and intent when he shot Johnson, demonstrating deliberate and methodical behavior rather than extreme psychosis. The court concluded that Davis's actions were intentional, and thus, the insurance policy's exclusion for intentional injuries applies. The ruling reinforces the principle that individuals should bear the financial consequences of their intentional actions, regardless of their mental state, provided they understand the nature of their conduct. The court maintained that the definition of insanity relevant to insurance exclusions should align with that of criminal law, affirming that intentional acts by a mentally ill insured are not covered if they comprehend their actions and intend to cause harm, even if they do not perceive those actions as wrongful.

Kearbey contends that the district court erred in jury instructions regarding his mental state's relevance to the insurance contract's exclusionary provision and in defining the burden of proof. The Court of Appeals observed that Kearbey did not object to these instructions and ruled they were not clearly erroneous. It emphasized that jury instruction errors warrant reversal only if they cause prejudice. The instructions adequately addressed how Kearbey's sanity impacted the intent issue, and Kearbey was not prejudiced by them. Under Kansas law, the insurer must prove exceptions to policy coverage, while the insured must show the loss falls within the coverage. Kearbey was presumed to have intended the natural consequences of his actions, and sanity is presumed until disproven, placing the burden on him to provide evidence against these presumptions. The Court of Appeals upheld the jury instructions and addressed the issue of liability for the guardian ad litem's attorney fees. It concluded that the State's Social and Rehabilitation Services (SRS) was not properly joined as a party and lacked personal jurisdiction, thus invalidating the trial court’s fee assessment against SRS. While attorney fees are generally not recoverable without explicit legal authority, the court has inherent authority to compensate those assisting it, including guardian ad litem fees. The Court of Appeals remanded the case to determine which parties should be responsible for these fees, with the guardian ad litem requesting a decision to avoid further costs and delays. The district court retains the authority to appoint a guardian ad litem and issue necessary orders to protect the minor's interests.

The drafters of the Kansas Code of Civil Procedure and the legislature recognized a court's inherent authority to compensate individuals appointed to assist it. In the case of In re Estate of Showers, the court did not determine whether guardian ad litem fees could be taxed as costs under K.S.A. 60-217(c) because the probate code expressly permitted such fees. The court ruled these fees should be charged to the estate rather than the heir who initiated the lawsuit. The case at hand, involving Shelter and the acts of Kearbey, revealed a trial court's erroneous imposition of attorney fees against SRS, which was rectified by the Court of Appeals due to improper service. The Court of Appeals clarified that K.S.A. 38-1616 did not obligate SRS to cover attorney fees in civil actions concerning juveniles. While the need for guardian ad litem compensation is acknowledged, the specific payer remains undecided, prompting a remand to the district court to resolve this issue among Shelter, the parents, and SRS. The Court of Appeals' judgment was affirmed, with a partial affirmation and reversal of the district court's judgment. Justice Herd dissented on the interpretation of intent regarding Kearbey's actions, arguing that an insane person cannot possess the intent necessary for committing a crime, thus challenging the application of Shelter's policy exclusion for intentional acts.