Wichita Firemen's Relief Association v. Kansas City Life Insurance Company

Filing 544

MEMORANDUM AND ORDER denying Plaintiff's claim for attorney fees. Signed by Magistrate Judge Kenneth G. Gale on 2/21/17. (df)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
WICHITA FIREMEN’S RELIEF
ASSOCIATION,

)
)
)
Plaintiff,
)
)
v.
)
)
KANSAS CITY LIFE INSURANCE
)
COMPANY,
)
)
Defendant. )
___________________________________ )

Case No. 11-1029-KGG

MEMORANDUM & ORDER DENYING
PLAINTIFF’S CLAIM FOR FEES PURSUANT TO K.S.A. §40-256
This action was brought by Plaintiff Wichita Fireman’s Relief Association
(WFRA) on behalf of its member, the late Captain Urban Eck, to recover an
accidental death and dismemberment (AD&D) benefit in a life insurance policy
issued by Defendant Kansas City Life Insurance Company (KCL)1. After proper
application by WFRA, KCL paid the death benefit but denied the AD&D benefit.
At trial, the jury found that Captain Eck’s death was within the AD&D coverage,
and awarded the plaintiff the $100,000 benefit on Captain Eck’s behalf.
Now before the Court is Plaintiff WFRA’s attorneys fee claim under K.S.A.
§ 40-256, which provides for the payment of fees if the insurer refused to pay the
1

WFRA is the named beneficiary of the policy, but will pay the proceeds of the
recovery to Captain Eck’s beneficiaries.

claim “without just cause or excuse.”2 Following the jury trial the Court accepted
additional evidence on this claim, and ruled that, to the extent relevant, the jury
trial evidence would also be considered.
Under Kansas law, K.S.A. §40-256 requires the court award attorneys fees if
an insurer “has refused without just cause or excuse to pay the full amount of such
loss.” This standard is satisfied if the plaintiff establishes that the denial of the
claim was “frivolous, unfounded and ‘patently without any reasonable
foundation.’” Hartford Cas. Ins. Co. v. Credit Union 1 of Kansas, 268 Kan. 121,
131, 992 P.2d 800 (1999) (citing Clark Equip. Co. v. Hartford Accident &
Indemn. Co., 227 Kan. 489, 494, 608 P.2d 903 (1980)). “A refusal of payment is
not unfounded or frivolous if there exists a good faith legal controversy as to
coverage or a bona fide and reasonable factual dispute.” First Nat. Bank, Abilene,
Tx. v. American States Ins. Co., 134 F.3d 382 (Table), 1998 WL 30246, *4 (10th
Cir., Jan. 9, 1998) (citing Clark Equip. Co., 608 P.2d at 907)).
Whether just cause exists is to be determined by the circumstances facing the
insurer when payment is denied, judged as they would appear to a reasonably

2

Plaintiff brought the fees claim as a separate count in its Complaint (Doc. 331),
rather than by motion following trial. The parties, and the Court, agreed that this choice
of procedure is irrelevant. The parties also agreed, and the Court ruled, that the question
of liability for fees under K.S.A. § 40-256 is determined by the Court (Doc. __).
2

prudent person having a duty to investigate in good faith. Hartford Cas. Co., 268
Kan. at 131. “Whether an insurance company’s refusal to pay is without just
cause or excuse is determined on the facts and circumstances of each case.” Foster
v. Stonebridge Life Ins. Co., 50 Kan.App.2d 1, 27, 327 P.3d 1014 (2014). It is not
dispositive that a jury ultimately finds in favor of coverage. See, e.g., Kovach v.
State Farm Gen. Ins. Co., No. 88-2099-S, 1989 WL 94574, *1 (D. Kan. July 28,
1989) (“The fact that the jury returned a verdict in favor of plaintiff on the issue of
liability does not automatically entitle plaintiff to recovery of attorney's fees under
the Kansas statute.”); Koch v. Prudential Ins. Co. of America, 205 Kan. 561, 565,
470 P.2d 756 (1970) (stating that fees are not to be awarded under § 40-256
“merely for the reason that it turned out at the trial” there was “no reason for denial
of liability”).
FACTS
WFRA submitted the initial claim, which was denied after consideration by
an ad hoc committee of KCL officials. The WFRA was provided a right to appeal
by the contract, and did so, submitting some additional information.3 The claim
3

The appeal in this case was occasioned by KCL policy, and by an attachment to
the policy which referenced ERISA (Employment Income Security Act of 1974) rights.
The Court finds that the “ERISA” attachment was part of the policy and part of the
contract. The terms on that attachment apply in this case. This Court previously ruled
that ERISA itself was inapplicable to this claim, but the “appeal” procedures that were
followed were treated as part of the agreement by the parties. Wichita Firemen’s Relief
3

was denied again.4 The facts provided to the KCL in the claim and appeal,
including the medical conclusions by Captain Eck’s physicians and the basic facts
medical conclusions reached by KCL’s medical director, were essentially in
agreement.
Captain Eck was a firefighter with the Wichita Fire Department. He was in
apparent good health with no history of heart problems when, on December 13,
2009, he participated in fighting a large fire. He exerted himself physically in that
activity, but there is no evidence this exertion was out of the ordinary for a
firefighter. Immediately following the fire on December 13, he participated in
routine medical monitoring. He uncharacteristically required a longer time to
return to baseline vital signs. At his next duty shift on December 16, 2009, he
reported feeling unusually tired and congested and could not recover as he
normally did after exertion. He told others he felt he had never fully recovered
from the December 13th fire.
On December 18 and 19, 2009, Captain Eck sought medical care for these
Assoc. v. Kansas City Life Ins. Co., No. 11-1029-KGG, 2014 WL 588064, at *13-14 (D.
Kan. Feb. 14, 2014). The Court continues to reject Plaintiff’s attempt to apply ERISA
legal standards to this matter.
4

There were some continuing negotiations after the appeal denial and KCL claims
that it was still re-considering the claim when the lawsuit was filed. However, these were
clearly in the nature of settlement negotiations after the denial was complete. The denial
was complete after the denial of the appeal.
4

and other progressive symptoms of shortness of breath, chest tightness, and
difficulty breathing while lying flat. He visited his physician and a cardiac
specialist.
Physicians concluded that Captain Eck had ruptured chordae tendineae,
which are the parachute-string-like structures supporting a heart valve leaflet. This
caused mitral valve insufficiency, which required surgery. It was found that
Captain Eck had a pre-existing condition called myxomatous degeneration, a
progressive condition which compromises the strength of the chordae. This
condition, although asymptomatic, predisposed his heart to the rupture suffered
when fighting the fire.
Captain Eck was placed on medication, hospitalized and released, and
surgery was scheduled for December 29, 2009. He returned to the hospital to
undergo surgery to repair the rupture. During the surgery, the surgeon
inadvertently kinked an artery, which caused a heart attack. The heart attack
directly resulted in Captain Eck’s death.5 The physicians concluded that the
rupture of the chordae was an acute event which happened as a result of extreme

5

The opinion of Defendant’s trial expert that the rupture was not acute is not
appropriate for consideration on the present issue because it was not part of the
circumstances facing the insurer at the time of the denial of the claim (or before suit was
filed).
5

physical exertion while fighting the fire. The documents included the death
certificate signed by his physician Dr. Koehler certifying that the “manner of
death” was “natural.” Dr. Koehler could have chosen “accident” on that form.
The AD&D policy provided coverage if Captain Eck’s death resulted
“directly and independently of all other causes from accidental bodily injuries.” A
separate exclusion provided that “[n]o amount will be payable for loss caused by,
contributed to or resulting from: 5) bodily or mental illness or disease of any kind,
or medical or surgical treatment of the illness or disease.”
The claim was reviewed by five officials from KCL who were assembled as
a committee for the purpose of reviewing this claim after it was referred by the
initial claims examiner through her superior. Those officials were Donna Shields
(Manager of Customer Service and Claims), Anne Snoddy (Vice President of
Claims), Dale Dake (Assistant Vice President of New Business), Matthew
O’Connor (legal counsel), and Dr. Charlotte Lee (Medical Director)6. Snoddy, the
Vice President of Claims had been with KCL more than 30 years. Shields, the
Manager of Customer Service and Claims, reported to Snoddy. O’Connor,
assistant general counsel, has been a practicing attorney for 18 years. Dake has

6

Dr. Lee, an M.D., is not a cardiologist. She but completed a fellowship in
clinical cardiology in her early training. She is board certified from the American Board
of Insurance Medicine.
6

been with KCL for 26 years and in the insurance industry 10 years before that.
O’Connor performed some legal and medical research in association with
the claim, and told the group that his research supported the denial of the claim.
The exact nature of that research is unknown. O’Connor drafted the denial letter.
There were no written policies or guidelines at KCL that governed the claim
review. The committee did not request additional information. The five met twice
before the initial denial and agreed that there was no coverage under the policy.
After the first meeting, Dr. Lee was asked to clarify her conclusions in
writing. She reached the following conclusions:
There is a question of whether or not the deceased died
from an accidental cause of death. The claim is for
accidental death benefits because of death due to injuries
suffered from working in a fire December 13. The cause
of death was stated to be a massive heart attack suffered
because of surgery to repair a ruptured chordae tendinae
of the mitral valve. The rupture was felt to have been
acute and likely a result of extreme exertion during his
fire-fighting activities on December 13. I do not have
access to his medical records prior to his death, so will
not comment on his previous cardiac status. There is
reportedly a family history of coronary artery disease. He
was found at autopsy to have myxomatous degeneration
of the mitral valve, but it is not known whether this was
known prior to death. Such a change in the valve is not
an acute change, rather is either present at birth or comes
about gradually over time.
After having continued shortness of breath, chest
tightness, and difficulty breathing while lying flat, he had
7

a cardiac evaluation that revealed mitral insufficiency
with myxomatous degeneration of the mitral valve and a
ruptured chordae. He underwent surgery to repair the
valve and never recovered from surgery. At autopsy, he
was found to have had a massive heart attack that was
felt to be due to compromise of one of the coronary
arteries during the mitral valve surgery.
The description of the policy benefit states in #1 under
The Benefit that benefits are payable if the loss results
directly and independently of all other causes from
accidental bodily injuries.7 #5 under Exclusions states
that no amount will be payable if the loss was caused by,
contributed to, or resulted from: bodily or mental illness
or disease of any kind, or medical or surgical treatment of
the illness or disease. Even though extreme exertion can
contribute to rupturing of a chordae in someone who has
pre-existing valvular or coronary artery disease, I do not
consider his death as having been caused by bodily
injuries suffered while acting as a fire fighter. Regarding
the exclusion, the fact that the immediate cause of death
was the heart attack that was suffered as a result of
compromising the coronary artery during surgical
treatment of his valve, this death is considered a direct
result of that surgery and hence is an excludable event.8
In the initial denial letter to WFRA, KCL stated:
Thank you for allowing us time to review your request.
7

Dr. Lee considered the presence of an external force necessary to find that the
loss was caused by an accident. Mr. Dake also held that opinion.
8

KCL medical director Dr. Lee testified that she did not read Dr. Kohler’s or Dr.
Uhlig’s letters before reaching this opinion. Her medical opinion that the rupture was
acute and caused by exertion was not contrary to those physician’s opinions. She also
testified that she reviewed only the exclusions portion of the policy – a curious statement
given that she also quotes the benefits section in her written opinion.
8

After evaluation of the information provided the request
for payment under the Group Accidental Death and
Dismemberment Rider is being denied, as the death was
not caused directly and independently of all causes from
accidental injury as the insured’s underlying heart
condition, as well as circumstances surrounding the
surgery, contributed to his death and therefore, the
applicable exclusions of the policy apply. The
description of the policy benefit states that benefits are
payable if the loss results directly and independently of
all other causes from accidental bodily injuries. Under
the Exclusions it states, No amount will be payable for
loss caused by, contributed to or resulting from: (5)
Bodily or mental illness or disease of any kind, or
medical or surgical treatment of the illness or disease.
If you disagree with this determination, the beneficiary
may appeal this claim decision by sending their written
request for review to Kansas City Life Insurance
Company within 60 days of receipt of this notice. If they
wish, they may submit additional information as well as
their comments and views of the issues, in writing, and
may examine pertinent documents. However, we must
have written authorization from the treating physicians
before they can review medical information.
WFRA appealed the decision and provided additional documentation,
mostly medical records. After review of the appeal and additional information, the
claim was denied again. Legal Counsel O’Connor apparently decided and denied
the appeal after consulting with Snoddy and Shields. O’Connor wrote a denial
letter advising WFRA:
This letter is in follow up to our phone conversation
regarding the above referenced claim. First, please
accept the condolences of Kansas City Life Insurance Co.
9

and its employees. We are truly sorry for your loss and
for the heartache endured by the Eck family. Your April
26, 2010 letter requests an appeal of KCL's denial of the
Accidental Death Benefit (“ADB”) in connection with
Mr. Eck's death. KCL notes that it has paid the
underlying claim of $100,000 and that your appeal is
limited to the ADB benefit, which is also $100,000.
The ADB Rider states that accidental death benefits will
be paid ‘when the loss…results directly and
independently of all other causes from accidental bodily
injuries.’ (Page 1 of the ADB Rider, ‘The Benefit’
definition, section (1), a copy of which is enclosed). The
ADB Rider further states:
‘EXCLUSIONS
No amount will be payable for loss caused by,
contributed to or resulting from: (5) bodily or
mental illness or disease of any kind, or medical or
surgical treatment of the illness or disease.’
In this case, Mr. Eck's death did not result directly and
independently from accidental bodily injury. Rather, at
least two other factors contributed to his death,
precluding the payment of the ADB benefit. First, Mr.
Eck suffered from an underlying medical condition,
namely myxomatous degeneration of the mitral valve in
his heart. Such a change in one's heart valve is not an
acute change; rather, it is either present at birth or comes
about gradually over time. Indeed, Mr. Eck may not
have known that he suffered from this underlying
condition. This condition contributed to Mr. Eck's death.
As a result, under the terms of the ADB rider quoted
above, Kansas City Life is not obligated to pay the ADB
benefits. Second, the actions of the surgeon in the
attempted repair of Mr. Eck's degenerative heart
condition appear to have contributed to his death.
Specifically, during the surgery, Mr. Eck's coronary
10

artery was compromised causing him to suffer a heart
attack which contributed to his death. The compromising
occurred as a result of surgical treatment of Mr. Eck's
underlying degenerative heart condition. As your letter
acknowledges, ‘[Eck] ultimately died from complications
arising from surgical treatment of the physical injury he
sustained fighting the fire.’ As such, under the terms of
the ADB rider quoted above, Kansas City Life is not
obligated to pay the ADB benefits.
DISCUSSION
There was no material factual or medical dispute at the time the claim was
denied. Although there was a great deal of medical information, the essential facts
were understood by Dr. Lee and KCL as those presented by Captain Eck’s
physicians. (1) Before the fire he had a predisposing condition (myxomatous
degeneration) which made him more vulnerable to the risk of chordal rupture. (2)
That condition was progressive and he had likely had the condition for some
undetermined period of time. (3) That condition had caused him no symptoms and
did not, before the chordal rupture, require surgical intervention. (4) During the
fire, Captain Eck suffered an acute rupture of chordae tendineae caused by exertion
while fighting the fire. (5) Captain Eck’s symptoms following the fire were caused
by the chordal rupture. (6) The surgery was required to repair the chordal rupture.
(7) Captain Eck’s death was directly caused by a surgical mishap which occurred
during the surgery when the surgeon kinked an artery, resulting in a heart attack.
11

These are the medical facts found by KCL’s medical director, Dr. Lee, and,
factually, constitute the circumstances facing the insured at the time of the denial.9
While the Plaintiff urges a finding that there was an inadequate factual
investigation, it is clear that at the time of the denial KCL was confronted by the
same facts now, and then, urged by WFRA. Although KCL had a duty to
investigate the facts of the claim (Foster, 50 Kan.App.2d at 27), no amount of
investigation would have altered these facts more in WFRA’s favor. This case is,
therefore, not about a failure to perform an adequate fact investigation. See Farm
Bureau Insurance Co. v. Carr, 215 Kan. 591, 598, 528 P.2d 134, 140 (1974)
(cases dealing with duty to investigate inapplicable when never any significant
dispute over the facts). Plaintiff’s complaints concerning the quality of the factual
investigation are illogical in light of the fact, as recognized in Plaintiff’s
memorandum, that KCL’s “medical director agreed with [Captain Eck’s
physicians] on the key medical facts and on causation.” (Plaintiff’s Trial Brief,
Doc. 536, at 3).10
The dispute in this case at the time of the denial was not factual. Rather, the
9

The possibility that some members of the committee did not understand that Dr.
Lee believed the rupture was acute and caused by exertion at the time of the fire does not
change these were the proper facts facing KCL at the time of the denial.
10

Equally without impact on the ultimate question is the clerical failure of KCL
officials to complete and sign an “ADB” form that was part of the KCL file.
12

parties differed in their application of policy provisions to the facts. The issue was
always whether, under these facts and within the meaning of the policy, the acute
rupture of Captain Eck’s chordae tendineae as a result of the substantial physical
stress of his usual employment and his predisposition to that injury because of a
pre-existing condition constituted an “accidental bodily injury” which, together
with the resulting surgery, resulted in his death “directly and independently of all
other causes” within the meaning of the policy.
It is clear that the judgment of KCL in denying the claim was that it did not
and that the surgical mishap itself could not be an independent “accident” because
of the policy surgical exclusion. The question for the Court at this juncture, then,
is whether this position, at the time of the denial, was “frivolous, unfounded and
‘patently without any reasonable foundation.’” Hartford Cas. Ins., 268 Kan. at
131 (citing Clark Equip. Co., 227 Kan. at 494), or whether it was “a good faith
legal controversy as to coverage.” This determination is to be made from an
objective review of the facts and circumstances at the time of the denial.
There were objectively three good-faith grounds for the denial. These are
those articulated by KCL in the denial letters.
First, coverage required an “accidental bodily injury.” The legal position
that this condition required an external force, or perceptible accidental event, while
13

not prevailing at the Court of Appeals, was not “frivolous.”11 However, even under
the standard as clarified by the Court of Appeals (and incorporated into the jury
instruction at trial), it was far from frivolous for KCL to take the position that there
was no “undesigned, sudden, and unexpected event, usually of an afflictive
character, and often accompanied by a manifestation of force,” that resulted in the
chordal rupture, whether the force is considered as coming from within or from
without. The “force” and the “accident,” to be within the coverage, must have

11

This Court initially granted summary judgment in this case on this issue – a
ruling that was reversed by the appellate court. Neither of those rulings resolve the
present issue as a matter of law. There were some differences between the evidence
considered by this Court in the summary judgment process and that considered or
available to KCL at the time of the denial. Also, it is possible that both this Court and
KCL were so wrong on this question as to render the denial “frivolous, unfounded and
patently without any legal foundation.” The appellate court recognized the essential
dispute – that WFRA focused on the acute rupture at the time of the fire while KCL
focused on the decedent’s chronic mitral valve disease. The appellate court assumed,
appropriately when reviewing a grant of summary judgment, that the death was caused by
the acute rupture of the chordae tendineae caused by extreme physical exertion while
fighting the fire. The appellate court faulted this court for relying on language from a
Kansas Supreme Court case (Miller v. Prudential Ins. Co. of Am., 183 Kan. 667, 331
P.2d 310 (Kan. 1958), which the appellate court considered an “anomaly” in Kansas law.
The Court approved the basic legal standard applied by this Court, that accident is defined
as “an undesigned, sudden, and expected event, usually of an afflictive character, and
often accompanied by a manifestation of force.” The appellate court reminded this Court
that the force contemplated by the definition could be a “force from within.” The
appellate court remanded this case for trial, finding that the rupture of chordal structures
within Mr. Eck’s heart could be found by a jury to be unexpected and unforeseen, even
given that fighting fires under strenuous conditions was within his line of duty. The
appellate court found that the “jury would have been authorized” to conclude that Mr.
Eck’s loss was caused by “accidental bodily injury” under the policy. That analysis
illustrates the good faith legal dispute on this issue.
14

been the rupture itself, or the exertion which, with the predisposing condition,
caused the rupture. This exertion was not clearly unexpected for a fireman. While
the jury had the discretion to find that this constituted an “accidental injury” within
the meaning of the policy, it was reasonable for KCL to take the position it was
not.
Secondly, even if there was an “accidental injury,” coverage required that
death be caused “directly and independently of all other causes” by the accidental
bodily injury. There is no question in the records considered by KCL that Captain
Eck’s heart valve had a predisposing and progressive condition (myxomatous
degeneration). So even if the acute rupture caused by exertion was an accident, a
finding of coverage may be fairly read to require that the death was independent of
any other cause. This was a question for the fact-finder in this case, but it was not
frivolous for KCL to deny coverage on the basis that the predisposing condition
was a contributing cause.
Finally, if there was no “accidental injury,” the surgical mishap itself as a
cause of death is excluded by the exclusions cause.12 It was not frivolous for KCL

12

Of course, if the surgery was for an accidental bodily injury, the exclusion
would be inapplicable. That some members of the committee were confused about this at
trial does not change the objectively appropriate consideration of this issue at the time of
the denial.
15

to view the rupture and surgery as continuing events in the progressive
myxomatous degeneration – thus viewing the death has cause by a non-accidental
“bodily or mental illness or disease of any kind, or medical or surgical treatment of
the illness or disease.”
Plaintiff urges reliance on Foster v. Stonebridge Co., 50 Kan.App.2d 1, in
support of this claim. In Stonebridge, also an AD&D claim, the decedent suffered
broken hip in a fall and then died as a result of complications from surgery. The
insurance company plainly failed to understand the medical records, and failed to
understand that the surgery was necessitated by an accident. Though similar to the
present case, Stonebridge is factually distinguishable. The fall in Stonebridge was
unambiguously an “accident,” unlike the internal medical injury in this case, which
was precipitated, in part, by a preexisting and predisposing medical condition.
Also, unlike the insurer in Stonebridge, the medical facts were reviewed and
understood by KCL in this case, which made a reasonable, although ultimately not
prevailing, application of the facts to the policy.
Plaintiff also urges the Court find that violations by KCL of the Kansas
Uniform Trade Practices Act, K.S.A. §40-2404(9) and applicable regulations
support its claim under K.S.A. §40-256. There is no private cause of action under
the KUTPA. Bonnel v. Bank of America, 284 F.Supp.2d 1284, 1289 (D. Kan.
16

2003). It does not appear that any court has applied the KUTPA or regulations
(e.g., K.A.R. 40-1-34) to find a violation of K.S.A. §40-256, although this Court
does not rule whether such might be a proper consideration in an appropriate case
on the issue of bad faith. In the present case, the Court finds that there was no
violation of those standards which was logically and casually related to a bad faith
denial of the claim or which is relevant to the bad faith issue in this particular case.
The insurer was faced with a factually and medically unusual case which
required a non-routine interpretation of the policy. The facts presented to and
found by KCL were consistent with the medical records and would not have been
improved through additional investigation. The law was unclear, with cases
providing competing standards. But even as understood through the clarified
hindsight of the legal history of this case, the application of the that law and the
policy language to the facts did not dictate a clear, single result. Viewed
objectively under the circumstances facing KCL at the time of the denial, the
evidence does not support a finding of bad faith.
The claim for attorneys fees is, therefore, DENIED.13
13

The Court deferred ruling on some evidentiary issues at trial. Defendant’s
objection to the admission of Plaintiff’s Bench Trial Exhibits 23 and 24, the affidavits of
Jeffrey Seeman and Cynthia Anderson, and to KCL Interrogatory Responses (Plaintiff’s
Bench Trial Exhibit 30) on the basis of hearsay are overruled, and those exhibits are
admitted. Defendant’s objections to testimony and exhibits concerning post-claim denial
settlement discussions have been withdrawn (Doc. 535 note 5), so that evidence is
17

IT IS SO ORDERED.
Dated at Wichita, Kansas, on this 21st day of February, 2017.
S/ KENNETH G. GALE

Kenneth G. Gale
United States Magistrate Judge

admitted. As to this last, the Court does not consider this evidence particularly relevant
because the final denial had occurred before these negotiations. Also, the settlement offer
made by KCL was just that, an offer, not a “tender” of payment, which is something very
different.
18