Sometimes what appears to be the most routine home sale can lead to serious legal issues and serious litigation. In James T. Krause and Patricia Ann Vanlear v. James M. Kerns and Christine C. Kerns and American Automobile Insurance Company No. 121,842, Court of Appeals of the State of Kansas (October 16, 2020) James M. and Christine C. Kerns owned a home that was covered by a homeowner's insurance policy issued by the American Automobile Insurance Company (AAIC). Kernses entered into an agreement to sell his home to James T. Krause and Patricia Ann Vanlear (collectively Krause). As part of the sale, Kernses provided a disclosure notice showing that there were no issues with several common problem areas when purchasing a home. According to Krause, however, the revelation presented either erroneous problems or completely omitted problems with the home.
THE MISSION AND COVENANT NOT TO PERFORM
The suit between Krause and Kernses was dissolved. As part of the settlement, Kernses agreed to set a final verdict of $ 79,482 in favor of Krause. Kernses also agreed to transfer "all of their rights, claims and causes of action against AAIC and its agents, brokers, employees, executives and any other person or entity relating to our origin" from Kernses' insurance with AAIC. In addition, Krause agreed not to take any action to collect their verdict against Kernses. Instead, Krause could only continue to collect the verdict against AAIC.
Krause and Kernses settled the suit, and as part of the settlement, Kernses agreed to grant Krause all his rights under their insurance. The insurer successfully moved for a summary assessment and claimed in part that the coverage under the policy was not triggered because there was no "event" that the policy required.
The information at the time of the sale stated that " SELLER understands that the law requires disclosure of significant deficiencies that SELLER knows about the property for potential buyers and that failure to do so may lead to civil liability. for damages ”
According to Krause, they discovered several problems with the property after the property that were not properly addressed in the disclosure. For example, Krause claimed that the pool was in serious disrepair, the fireplace was unusable due to ventilation problems, there was a leak in The basement and lawn irrigation system were largely unusable.
The insurance contract referred to in the settlement agreement referred to the homeowners' insurance that Kernses had through AAIC. Basically, Krause claimed that an "event", as defined in the insurance policy, included the "insurance policy". from [the Kernses] to remedy or otherwise correct the errors and omissions claims from disclosure made by [the Kernses] in the disclosure. "Krause claimed that" the damage to the property transferred by [the Kernses] to Krause in an incident. "
The district court granted AAIC's request for a summary judgment, noting that although the disclosure and subsequent damages constituted an event as defined in the policy, Krause was still unable to recover due to another exclusion clause in the policy. any obligation to harm Kernses because Kernse's statements and Krause's dependence on those statements clearly fall within the exclusion.
Krause agrees that there is a provision in the AAIC policy which, in itself would exclude all claims that Krause acknowledges that the insurance policy excludes the claims they make, but argues that the case is not solely dependent on the assumption that AAIC is liable to Krause based on the tort policy that insures Kernses only in the event of an incorrect submission ng.
Under AAIC agreed to insure Kernses in the event of: “A. Loss of property and bodily injury; personal injury; or damage to property caused by an event; or B. Loss assessment charged to you; during the policy period.
The whole linchpin in this case was whether there was an event, as defined in the policy, that would trigger coverage. If no event occurred, there is no policy coverage and thus no need to look at any other policy provisions on inclusion or exclusion.
In order for AAIC to cover Kernse's liability, there must have been an event – defined as “[a] n accident, including continuous or repeated exposure to the same general harmful conditions, resulting in bodily injury or damage to property. "An" event "must be random, it is an undesigned, sudden and unexpected event, usually of a suffering or unfortunate nature, and often accompanied by a manifestation of force. With that definition, there is no event that would require AAIC to harm Kernses for Krause's cause against them.
The termination was not an event as defined in the policy. The completion of the home was designed, planned and expected.
Costs for repairing defects that existed at the time of sale are not damages to material property caused by incorrect manufacture. The district court did not err in granting AAIC's request for a summary judgment and claiming that there was no incident as defined in AAIC's policy. And the existence of such an event is the necessary precedent for the application of provisions that enable coverage under any other policy policy.
All of Krause's and AAIC's further arguments were irrelevant because the district court did not err in issuing a summary judgment in AAIC because there was no incident and therefore no coverage under the policy.
There is only one reason to enter into a settlement agreement that takes an allotment of a defendant's rights against his insurance company and a union not to enforce judgment against the defendant is if the defendant is judgmental. This case gave the plaintiffs a judgment which they could not collect. It is clear that an incorrect presentation which does not cause any damage cannot be satisfactory, especially when the incorrect presentation was made intentionally and deceived the plaintiffs. If Kerns had any assets sufficient to pay the verdict – and they would do so if they favored the sale – it would be foolish to take the assignment. If they were legally certain, analysis of the legal issues would have led the plaintiff's lawyer to refuse to sue the insurer.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice of serving as an insurance consultant specializing in insurance coverage, insurance management, insurance claims and insurance fraud almost equally for insurance policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
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