Parker v. Farm Bureau Property & Casualty Insurance Co.
Docket: Case No. 6:15-cv-01204
Court: District Court, D. Kansas; March 8, 2017; Federal District Court
Plaintiffs Brett and Dane Parker, operating as D. B Parker Farms, claim that Farm Bureau breached their insurance contract by failing to defend them in a civil lawsuit alleging violations of the Plant Variety Protection Act (PVPA) related to the sale of wheat seed. The lawsuit asserts that the Parkers sold protected seed varieties without authorization. The Parkers contend they were entitled to legal defense and coverage under their Farm Bureau policy's Business Injury Liability module, which Farm Bureau denied. The court has established the following uncontroverted facts: The Parkers received over 1,000 bushels of seed wheat from Steve Hirt in exchange for harvesting services, and later attempted to sell leftover seed directly to farmers, including a sale of 148 bushels to a buyer, who was later revealed to be a KWA investigator. The PVPA grants certificate holders exclusive rights to sell protected varieties, and KWA holds the PVPA certificate for Fuller wheat, which the Parkers did not have permission to sell. Following the sale, the KWA demanded $15,000 in compensation from the Parkers. The matter is now under consideration for summary judgment based on the cross-motions filed by both parties.
In March 2014, Brett Parker declined to disclose the seller of wheat and the planting locations for Fuller seed, causing a proposed $7,000 settlement to collapse. Subsequently, on April 4, 2014, the Kansas Wheat Alliance (KWA) and Kansas Seed Utilization Research Foundation (KSURF) filed a lawsuit against Brett and D. B Parker Farms, alleging violations of the Plant Variety Protection Act (PVPA) due to unauthorized advertising, selling, and replanting of Fuller wheat seed. The complaint sought monetary damages, an injunction against future infringements, treble damages for willful violations, and attorney's fees.
D. B Parker Farms had an insurance policy with Farm Bureau, effective from July 8, 2013, to July 8, 2014. This policy included a Farm/Ranch and Personal Liability module covering property damage and bodily injury during farming operations, but excluded business damages. The Parkers were added as insureds, and a Business Liability module for a rental property was applied for on May 6, 2009, listing an annual income of $3,600 from the rental at 116 Vista Rd, Waterville, Kansas. The Parkers paid for this coverage, which was included in subsequent bills from Farm Bureau, indicating the existence of business liability specifically for the rental dwelling. The policy defined 'Business' as activities engaged in for profit, and coverage was limited to damages resulting from business injuries related to the defined business activity. Coverage included bodily injury, property damage, and personal injury/advertising injury, with specific definitions provided for each term.
Coverage for Personal Injury/Advertising Injury includes specific offenses such as misappropriation of advertising ideas and infringement of copyright or slogans. The Intentional Acts Exclusion does not apply to this coverage. The Declarations page lists Brett Parker as the 'First Named Insured,' along with D. B Farms and Amanda Parker as Named Insureds, and outlines 'Property/Liability Coverage' with a total annual premium. It identifies two insured locations: the residences of Brett and Amanda Parker and specifies property damage coverage details, including limits and deductibles. While Farm/Ranch Liability coverage is referenced in the endorsements, it is not explicitly stated in the Declarations. The Business Liability module stipulates that Farm Bureau will defend against covered suits at its expense but has no duty to defend when coverage does not apply.
Brett Parker reported a lawsuit related to the PVPA to Farm Bureau on June 26, 2014, which led to a denial of coverage on August 1, 2014, and Farm Bureau's refusal to participate in mediation. Subsequently, in December 2014, the Parkers settled with KWA and KSURF, where Parker admitted to infringing PVPA certificates and agreed to a $200,000 consent judgment, conditioned on paying $60,000 within three years and adhering to the settlement terms. He made an initial payment of $20,000 in 2014, and a consent judgment was entered on January 5, 2016.
Summary judgment standards require the moving party to show no genuine dispute exists regarding material facts, with the burden of proof initially on the movant. The nonmovant must present specific facts indicating a genuine issue for trial, and the court evaluates evidence favorably towards the non-moving party.
Kansas law governs this case, requiring courts to interpret insurance policies based on the overall intent expressed in the language, as understood by a reasonably prudent insured, rather than the insurer's intent. Any ambiguity in the policy is construed against the insurer, which has a duty to clarify its terms.
Farm Bureau contends that there is no Business Liability coverage for the Parkers under the policy, asserting that coverage is limited to the “business” indicated in the Declarations, specifically referencing a “Rental Dwelling—1 Family.” The court finds that while Farm Bureau’s interpretation could be one reasonable construction, the policy is ambiguous. An insured could not definitively ascertain whether D. B Farms had Business Injury Liability coverage due to the unclear layout of the Declarations.
Three named insureds are listed—D. B Farms, Brett Parker, and Amanda Parker—without explicit limitations on coverage applicability. The policy does not clearly differentiate which coverages apply to which insureds, leading to confusion about the relationship between the rental dwelling and Business Injury Liability coverage. The Declarations mention Brett Parker as the insured for the rental dwelling but do not explicitly state that Business Injury Liability coverage is limited to the rental dwelling or that it excludes coverage for D. B Farms. Farm Bureau's argument that only a rental dwelling can be classified as a business is deemed unpersuasive, as the Declarations do not specify that Business Liability coverage is solely associated with the rental dwelling, nor do they exclude coverage for D. B Farms.
A reasonable insured could interpret the insurance policy as providing Business Injury Liability coverage to D. B Farms as a named insured. A contract is deemed ambiguous if it contains provisions with conflicting meanings, as established in *Farm Bureau Mut. Ins. Co. v. Old Hickory Cas. Ins. Co.*. The understanding of the average person, rather than the underwriter's perspective, is crucial in interpreting policy language. Insurers must use clear, unambiguous language to restrict coverage; otherwise, the policy will be interpreted in favor of the insured. The policy's language may lead a reasonable insured to believe that D. B Farms has Business Liability coverage, despite the circumstances of how coverage was added.
Regarding Personal Injury/Advertising Injury, the Business Liability module covers business injuries from offenses, including advertising injuries. An advertising injury could arise from misappropriation of advertising ideas or infringement of copyright or title. Brett Parker’s advertisement of Fuller seed wheat without authorization likely constitutes an advertising injury due to infringement of title as per the Plant Variety Protection Act (PVPA), which grants KWA exclusive rights to market and sell Fuller wheat. Parker's September 24, 2013 advertisement for the Fuller variety violated these exclusive rights and represents a compensable infringement. The policy does not define "title," but Parker’s actions can reasonably be seen as infringing KWA’s legal title to the Fuller wheat variety, which includes extensive rights akin to copyright protections.
Farm Bureau contends that courts, including the Tenth Circuit, have rejected the interpretation that 'copyright, title or slogan' encompasses a wide array of intellectual property infringements, citing the case DISH Network Corp. v. Arch Specialty Ins. Co. It argues that 'title' specifically refers to the name of a literary or artistic work rather than ownership rights over inventions. Furthermore, it asserts that the KWA complaint does not claim infringement of title but rather asserts exclusive control rights over Fuller seed wheat advertisements and sales. Farm Bureau's references to various cases, primarily involving patent claims, are deemed ineffective, particularly since the DISH case addressed 'misappropriation of advertising ideas,' which is not the focus here.
The court indicates that the DISH case undermines Farm Bureau’s arguments by clarifying that patent infringement is not covered under advertising injury provisions, as 'patent' is absent from the enumerated offenses while 'copyright' is included. Although the provision in question is not an exclusion, its ambiguity regarding whether a PVPA certificate holder's exclusive rights violation constitutes an 'infringement of title' is acknowledged. The court critiques Farm Bureau's reliance on U.S. Test, stating that the term 'title' should not be strictly limited by surrounding terms. Instead, a broader interpretation is supported by the insurer's commitment to cover various intellectual property infringements. The court emphasizes that an ordinary insured should not be required to interpret complex legal principles to understand policy meanings. Ultimately, the ambiguity is construed against Farm Bureau, allowing that a violation of PVPA rights could reasonably be viewed as an 'infringement of title.'
In the cited cases, courts primarily evaluated whether the advertising of an infringing product caused the claimant's injury, rather than defining 'title.' Generally, the sale of an infringing product is deemed the proximate cause of injury, and advertising alone does not constitute an 'advertising injury.' However, in this case, Parker's advertisement of Fuller wheat constituted an infringement of KWA’s exclusive marketing rights, resulting in an 'advertising injury' under the policy. Consequently, D. B Farms is entitled to coverage for KWA's claim related to this advertising injury, though the extent of damages covered remains undetermined as it was not addressed at summary judgment. The court noted that while KWA’s damages likely stemmed from Parker’s unauthorized sale, which is not covered, the issue of damages is for factual determination.
Regarding the insurer's duty to defend, under Kansas law, an insurer must defend whenever there is a potential liability under the policy, based on the complaint's allegations and any discoverable facts. The court concluded that a potential for liability existed due to the advertising injury claim, obligating the insurer to provide a defense for that claim. The court ordered the granting of plaintiffs' Motion for Partial Summary Judgment and the denial of the defendant's Motion for Summary Judgment, while acknowledging that there is no coverage under specific policy modules as conceded by the plaintiffs.
