Brotherhood Mutual Insurance Company v. T.C. et al
MEMORANDUM AND ORDER granting in part and denying in part 26 A.K.'s Motion for Summary Judgment; granting in part and denying in part 29 T.C.'s Motion for Summary Judgment; granting in part and denying in part 29 Motion for Hearing; granting in part and denying in part 31 Brotherhood's Motion for Summary Judgment; granting in part and denying in part 33 Brotherhood's Motion for Default Judgment against Steven Butler (see order for details). Signed by District Judge J. Thomas Marten on 11/13/2017. (mam)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
BROTHERHOOD MUTUAL INSURANCE
Case No. 16-1362-JTM
M.M., a minor by and through his natural
mother, T.C.; J.J., a minor by and through
his natural mother, A.K.; A.K.;
COMMUNITY CHRISTIAN CHURCH;
STEVEN BUTLER; RAY BARNHART;
ALAN CONRADY; MIKE EDDINGTON;
WILLIARD BRIGHT; BENNY DARBRO;
JIM AIKEN; BRIAN LESTER; LARRY
MCHUGH; and DALE MEADOWS,
MEMORANDUM AND ORDER
Brotherhood Mutual Insurance Company (“Brotherhood”) seeks a determination
of its liability under insurance policies it issued to Community Christian Church of
Independence, Kansas (hereinafter “Community Christian” or “the church”). In two
related lawsuits filed in state court, minors M.M. and J.J. claimed they were sexually
abused by Steven Butler, a pastor at Community Christian, and they sought damages
from Butler, the church, and, in J.J.’s case, from a group of individuals identified as
church elders. Brotherhood contends its coverage for these claims is capped by a
$300,000 limit in a Sexual Acts Endorsement, and that its duty to defend the church and
the elders terminated upon Brotherhood’s payment of $300,000. The defendants, on the
other hand, contend Brotherhood’s coverage is subject to a $1,000,000 limit, and that
Brotherhood’s duty to defend is ongoing.
The matter is now before the court on cross-motions for summary judgment. The
court also has before it Brotherhood’s motion for default judgment against Steven
Although oral argument was requested in this case, the issues presented are
questions of law concerning construction of an insurance contract and the court
concludes that oral argument would not assist in deciding the issues presented.
I. Uncontroverted Facts
Community Christian Church hired Steven Butler as a pastor in 2004. In 2012,
defendant M.M., a minor, alleged in a state-court lawsuit that Butler sexually abused
him from 2006 to 2010 while Butler was a pastor at Community Christian. M.M.
asserted claims against Butler and against Community Christian, including: Count I –
battery against Butler; Count II – intentional infliction of emotional distress against
Butler; Count III – negligent infliction of emotional distress against Community
Christian (including allegations that the church, through its elders, authorized or
ratified Butler’s conduct and knew or should have known he was engaging in
inappropriate conduct with minors); Count IV – negligent supervision against the
church; and Count V – negligent hiring and retention against the church.
Defendant J.J., a minor, and his mother A.K., filed a similar suit in state court in
2016 against Butler, Community Christian, and a group of individuals identified as
church elders. J.J. alleged sexual abuse by Butler from approximately 2006 to 2010. The
claims in that suit included: Count I – battery/sexual abuse against Butler; Count II –
defamation against Butler, the church, and the elders, based on allegations that after
J.J.’s mother reported the abuse to the church, Butler spoke from the pulpit to the
congregation and claimed that J.J. and his mother were “liars” and were trying to obtain
financial gain; Count III – negligent supervision against the church and the elders for
failing to supervise Butler; Count IV – negligent supervision against the church and
elders for failing to supervise minor parishioners; Count V – negligent infliction of
emotional distress; Count VI – negligent false detention or imprisonment, based upon
allegations that during one incident Butler locked a door and would not allow J.J. to
leave or J.J.’s mother to enter. The last incidents of sexual abuse alleged by J.J. and M.M.
occurred in 2009 or early 2010.
Butler was criminally charged with sexually molesting M.M. and J.J. in State v.
Butler, Case No. 12-CR-1961, in Montgomery County, Kansas. A jury convicted Butler of
aggravated criminal sodomy of J.J., but acquitted him of criminal charges with respect
to M.M. Butler received a life sentence without the possibility of parole until after 25
years. The Kansas Court of Appeals affirmed Butler’s conviction. State v. Butler, No.
112,723, 2016 WL 1614167, 369 P.3d 341 (Table) (Kan. App. 2016).
Brotherhood is defending Butler, Community Christian, and the elders in the
underlying civil lawsuits.
The Interpleader Action
Brotherhood filed an interpleader action in the District Court of Crawford
County, Kansas, No. 2016-CV-000101-P, through which it paid $300,000 under the
Sexual Acts Endorsement in the 2007-2010 policy. The $300,000 has been distributed to
M.M., J.J., and A.K., pursuant to an order of the Crawford County District Court.
Brotherhood issued two policies to Community Christian. The first policy was
effective from December 24, 2004, to December 24, 2007. The second policy was effective
from December 24, 2007, to December 24, 2010. Both policies were numbered
Each policy provides commercial liability coverage under form GL-100, for a
General Occurrence Limit of $1,000,000, and a General Aggregate Limit of $6,000,000.
The policies also provide additional coverage under BGL-63, BGL-81, and BGL-65 for
Counseling Acts, Directors & Officers coverage, and Religious Communication, in the
same amounts as the commercial liability. The policies also provide additional coverage
through a Sexual Acts Endorsement under form BGL-61, which is subject to a $300,000
coverage limit, and a $300,000 coverage aggregate limit.
The declarations page states that the coverages listed are subject to the terms of
the designated coverage forms. It states that only one liability coverage and one medical
coverage will apply to an occurrence and any related loss. It states that any limit which
is specifically stated within a coverage form or endorsement is the most that
Brotherhood will pay for the coverage to which such limits applies, and it refers to BGL11 for application of limits.
Form GL-100 Commercial Liability Coverage Form
The policies include form GL-100, which sets forth terms and conditions for
general liability coverage. Under “Principal Coverage L – Bodily Injury/Property
Damage,” Brotherhood promised to pay all sums which the insured becomes legally
obligated to pay as damages due to bodily injury to which the insurance applies. The
bodily injury must have resulted from an occurrence, which according to the policy
means an accident and includes repeated exposure to similar conditions. The policy
defined bodily injury to mean bodily harm, sickness or disease sustained by a person,
but not mental or emotional injury, suffering, or distress that does not result from a
The policy defined insured (in part) to mean “you and all of your executive
officers and directors, but only while acting within the scope of their duties….” The
term also included “your employees, for acts within the scope of their employment by
Form GL-100 provides, under a Section titled “How Much We Pay,” that the
“limits, shown on the declarations … are the most we pay regardless of the number of:
a. Insureds under the Commercial Liability Coverage; b. persons … who sustain injury
or damage; or c. claims made or suits brought.” It provides that the “Each Occurrence
Limit” is the most Brotherhood will pay for the total of damages under Coverages L, N,
and O, and medical expenses under Coverage M, due to bodily injury arising out of a
Form GL-100 contains a condition entitled “Separate Insureds,” which states that
coverage under Commercial Liability Coverage applies separately to each insured
against whom a claim is made, and that this does not affect the limits stated in the
Form GL-100 includes the following concerning Brotherhood’s duty to provide a
Payments under this coverage are in addition to the limits for the
Commercial Liability Coverage.
We have the right and duty to defend a suit seeking damages which
may be covered under the Commercial Liability Coverage. We may
make investigations and settle claims or suits we decide are
We do not have to provide defense after we have paid an amount
equal to the limit as the result of:
a. a judgment; or
b. a written settlement agreed to by us.
Liability and Medical Coverage Form (BGL-11)
The policies include form BGL-11, which is captioned “Liability and Medical
Coverage Form,” and which provides additional definitions, terms, and exclusions. It
further provides that all provisions of the GL-100 and any “Liability Coverage
Endorsements … (BGL Forms)” are subject to the terms of the BGL-11 form, and that in
the case of any conflicting terms, the BGL-11 form will control.
BGL-11 includes the following1 definitions:
Emotional injury means mental or emotional injury, suffering or distress
sustained by a person other than as a result of physical injury. It does not include bodily
injury or personal injury.
Loss means specified bodily injury, emotional injury, or personal injury.
Personal injury means injury arising out of one or more of the following
offenses: oral publication of material that slanders or libels a person or that violates a
person’s right of privacy, or false arrest. It does not include bodily injury or emotional
injury, “nor any injury arising directly or indirectly out of or in connection with any
sexual act [or] counseling act….”
Related loss means a loss of any kind arising directly or indirectly out of the
same occurrence, or out of the same or related acts, errors, omissions, decisions,
incidents, events, or breaches of duty.
Sexual act means any act that would be considered a criminal act under any law
relating to sexual offenses; any actual or attempted touching of a person or other act by
another for the purpose of obtaining sexual gratification; any conduct interpreted as
sexual harassment; and any conduct interpreted as being sexual in nature. Any such act
will be considered a single sexual act if undertaken by the same perpetrator, even if
such acts are directed against more than one person, happen over time, or take place
during more than one policy period.
The definitions below have been edited from the originals to eliminate certain irrelevant matters. Terms
appearing in bold indicate that the term was specifically defined in the policy.
BGL-11 states that the granting of the Principal Coverages (including Coverage
L) in GL-100 will not act to increase the limits stated for any Additional Coverages, and
only a single Liability Coverage and Medical Coverage will apply to any one occurrence
and any related loss.
BGL-11 states that the granting of the Additional Coverages in any Liability
Coverage Endorsement (as provided in a BGL form) will not act to increase the limits
stated for any Principal Coverage, and only a single Liability Coverage and Medical
Coverage will apply to any one occurrence and any related loss.
BGL-11 contains several exclusions, including one for loss of any kind “expected
by, directed by, or intended by any insured or by any covered person,” or “that is the
result of intentional and malicious acts of any insured or any covered person.”2 BGL11 contains a list of additional exclusions, including the following:
ADDITIONAL EXCLUSIONS THAT APPLY TO ALL
We do not pay for loss of any kind if one or more of the following
excluded causes or events apply to the loss, regardless of other causes or
events that contribute to or aggravate the loss, whether such causes or
events act to produce the loss before, at the same time as, or after the
excluded cause or event. * * *
We do not pay for loss of any kind arising directly or indirectly out
of or in connection with any actual or alleged sexual act. (But if
“Sexual Acts Coverage” is properly shown as an Additional
Coverage on the Declarations, then we will provide the coverage
afforded in the applicable Sexual Acts Liability Endorsement, but
strictly subject to the terms and limits of such Sexual Acts
The 2007-2010 policy changed the latter clause to exclude loss that is the result “of any willful, wanton
or malicious act of any insured or any covered person.”
Church Organization Additional Coverage Endorsement
The policies include form BGL-51, entitled Church Organization Additional
Coverage. This endorsement provides that it is subject to the terms of GL-100 and BGL11, and that “[o]nly one Liability coverage (Principal, Supplemental or Additional) will
apply to an occurrence and any related loss.” In it, Brotherhood promises to pay sums
that the church, or its leaders or employees, become legally obligated to pay as damages
due to personal injury to which this coverage applies. The event causing the injury
must arise out of the religious operations of the organization and must take place in the
coverage territory during the policy period. The coverage does not apply to oral or
written publication of material done by an employee who publishes the material
knowing it is false.
The Church Organization Endorsement also promises, under Membership
Emotional Injury Liability Coverage, to pay all sums that the church or its leaders
become legally obligated to pay as damages due to emotional injury to which the
coverage applies. The coverage does not apply, however, if the emotional injury “arises
out of any … sexual act” or out of “the actual, threatened or alleged touching of … one
or more persons by another person.” The endorsement further incorporates the
exclusions of GL-100 and BGL-11, and states that “[w]e do not pay for any loss arising
directly or indirectly out of or in connection with any … sexual act or counseling act.”
Religious Communication and Religious Activity Liability Coverage Endorsement
The policies include form BGL-65, which provides certain coverage for religious
communications and activities. The endorsement is subject to the terms of GL-100 and
BGL-11, and provides that “[o]nly one liability coverage (Principal, Supplemental, or
Additional) will apply to an occurrence and any related loss.” The endorsement
provides that Brotherhood will pay all sums that a covered person becomes legally
obligated to pay as damages due to emotional injury to which the coverage applies. The
coverage applies to emotional injury arising out of the church’s “religious
communication,” which is defined to include “a religious message, sermon, … or other
oral or written communication containing any religious or spiritual content that is
conveyed to three or more persons.” It also provides similar coverage for emotional
injury arising out of “religious activity,” defined in part as “an act or expression
undertaken in accordance with, and in furtherance of, the spiritual or religious beliefs of
The endorsement contains exclusions for loss arising directly or indirectly out of
any sexual act or out of the actual, threatened, or alleged uninvited touching of one or
more persons by another. It also excludes emotional injury arising directly or indirectly
out of any libel, slander, invasion of privacy or other personal injury, or arising directly
or indirectly out of any nursery or child care activity.
Sexual Acts Liability Coverage Endorsement
The policies include form BGL-61, entitled “Sexual Acts Liability Coverage.” This
endorsement provides that it is subject to the terms of GL-100 and BGL-11, and that
“[o]nly one Liability coverage will apply to a sexual act (including any error in
reporting such act) and any related loss.”
The endorsement promises that Brotherhood will pay all sums which a covered
person becomes legally obligated to pay as damages due to bodily injury, personal
injury or emotional injury” to which the coverage applies. The coverage applies if the
event or events causing bodily injury or emotional injury arose out of the insured’s
operation, and if the event or events causing personal injury resulted directly from a
sexual act arising out of the insured’s operation.
The endorsement contains an exclusion stating that Brotherhood will not pay for
loss of any person who participates in or directs any sexual act or who knowingly
allows it to occur.
The endorsement also provides in part that Brotherhood will provide the alleged
perpetrator with limited defense coverage up to the point the person pleads guilty or no
contest or is criminally convicted, or until a verdict relating to the sexual act is rendered
against the person in a civil court.
The Sexual Acts Endorsement contains a section entitled “How Much We Pay.” It
provides that, except as modified, the “How Much We Pay” provisions from BGL-11
apply to each of the Additional Coverages provided by this endorsement. The
endorsement lists the following modifications:
The Coverage Limit shown in the Declarations for Sexual Acts
coverage, subject to the General Occurrence Limit, the Coverage
Aggregate Limit and the General Aggregate Limit, is the most we
will pay for all losses sustained by one or more persons arising out
of any sexual act (or error in reporting such act) to which the
Additional Coverages of this endorsement apply. This Coverage
Limit is the most we will pay regardless of:
a. The number of persons or entities to whom this policy provides
b. the number of losses or related losses arising directly or
indirectly out of one or more related acts, errors, omissions,
decisions, incidents, events or breaches of duty; or
c. the number of persons acted upon, or who otherwise sustain
injury, damage or loss; or
d. the number of claims made or suits brought, or the number of
persons initiating such claims or suits; or
e. the number of sexual acts or other acts, errors, omissions,
decisions, events or breaches of duty contributing to the injury,
damage, or loss; or
f. the extent or duration of the injury, loss or related loss; or
g. the extent, duration or amount of sexual activity or the number
of acts, errors, omissions, decisions, incidents, events, or breaches
of duty contributing to injury, damage or loss; or
h. the number of our policy periods, or portions thereof, over
which any acts, errors, omissions, decisions, incidents, events, or
breaches of duty contributing to injury, damage or loss should
occur, or which the injury, loss, or related loss should occur.
The Coverage Aggregate Limit shown in the Declarations for Sexual
Acts coverage, subject to the General Aggregate Limit, is the most
we will pay under the Additional Coverages of this endorsement
for all sexual acts (including any error in reporting such acts)
taking place during the period to which the Coverage Aggregate
limit applies ….
If a sexual act to which any Liability Coverage of this policy applies
consists of sexual activity or behavior occurring on more than one
date during any policy period or policy periods, such activity or
behavior, together with any related loss, will constitute a single
sexual act, and the date of such act will be considered to be the
A. The date on which the last alleged sexual act out of which the
claim arises should occur; or
B. The last day that we provided any coverage to you for such act.
The policy forms, endorsements and limits in effect on such date
will govern coverage with respect to all claims arising directly or
indirectly out of the sexual act.
II. Summary of Arguments
Brotherhood argues that coverage for all claims in the underlying lawsuits is
capped by the $300,000 limit in the Sexual Acts Endorsement of the 2007-1010 policy.
Dkt. 32. It argues the claims are otherwise excluded from coverage (among other
reasons) by form BGL-11, which excludes loss that arises “directly or indirectly out of or
in connection with” a sexual act, and “regardless of other causes or events that
contribute or aggravate” the loss. Citing inter alia First Fin. Ins. co. v. Bugg, 265 Kan. 690,
962 P.2d 515 (1988). Brotherhood also argues it has no further obligation to defend or
indemnify the insureds because it has paid the applicable limit of $300,000.
Defendants A.K., J.J. and M.M. contend the sexual acts exclusion in BGL-11 does
not exclude claims against the church and elders for various acts of negligence.3 They
argue the exclusion applies only “to damages arising out of the sexual act itself.” Dkt. 27
at 12; Dkt. 30 at 9-10. They argue Kansas follows a minority view of the “arising out of”
language relied on by Brotherhood, under which Kansas recognizes that negligent
hiring, retention, and supervision (and similar claims) are theories separate and distinct
Defendants A.K. and J.J. acknowledge that the policies do not provide coverage for defendant Butler
with respect to the claims against him for sexual abuse. Dkt. 27 at 11.
from the underlying tort or wrongful act of an employee, such that they that must be
specifically mentioned to be excluded in these circumstances. Citing inter alia Marquis v.
State Farm Fire & Cas. Co., 265 Kan. 317, 961 P.2d 1213 (1998). Defendants argue that
cases such as Cont’l Cas. Co. v. Multiservice Corp., No. 06-2256-CM, 2009 WL 1788422 (D.
Kan., June 23, 2009) show that in Kansas, it is the theory of liability, not the cause of
injury, that governs the coverage issue. Dkt. 36 at 6. They further argue the Sexual Acts
Liability Endorsement, by its own terms, provides “additional coverage” to that
provided by CGL-10, so the $300,000 limit does not apply to coverage under GL-100,
which has a $1,000,000 limit. Finally, A.K. and J.J. argue that the policies provide
coverage for their defamation claim even if the court applies a broad view of the
“arising out of” language, because that claim is independent of the alleged sexual acts.
The church and its elders join in these arguments and additionally contend
Brotherhood’s duty to defend was not terminated by its payment of $300,000. They
contend coverage is not limited to $300,000, for the reasons set forth above. Moreover,
they argue the duty to defend does not end under the policy until Brotherhood has paid
the limit as a result of a judgment or settlement, and point out there has been no
judgment or settlement in the underlying suits. Dkt. 38 at 3.
III. Summary Judgment Standards
Summary judgment is appropriate if the moving party demonstrates that there is
no genuine dispute as to any material fact, and the movant is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a). A fact is “material” when it is essential to the claim,
and the issues of fact are “genuine” if the proffered evidence permits a reasonable jury
to decide the issue in either party's favor. Haynes v. Level 3 Commc’ns, 456 F.3d 1215,
1219 (10th Cir. 2006). The movant bears the initial burden of proof and must show the
lack of evidence on an essential element of the claim. Thom v. Bristol–Myers Squibb Co.,
353 F.3d 848, 851 (10th Cir. 2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–23
(1986)). The nonmovant must then bring forth specific facts showing a genuine issue for
trial. Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). The court views all
evidence and reasonable inferences in the light most favorable to the nonmoving party.
LifeWise Master Funding v. Telebank, 374 F.3d 917, 927 (10th Cir. 2004).
A. Construction of Insurance Contracts under Kansas law. If the language in an
insurance policy is clear and unambiguous, it must be construed in its plain, ordinary,
and popular sense. Marshall v. Kansas Med. Mut. Ins. Co., 276 Kan. 97, 111, 73 P.3d 120
(2003). The court’s function in such a circumstance is to enforce the contract as made.
Farm Bureau Mut. Ins. Co. v. Old Hickory Cas. Ins. Co., 248 Kan. 657, 659-60, 810 P.2d 283
(1991). When the terms are ambiguous, however, the construction most favorable to the
insured must prevail, because the insurer prepares its own contracts and has a duty to
make the meaning clear. Id. A policy is ambiguous when it contains language of
doubtful or conflicting meaning based on a reasonable construction of the policy’s
language. Marshall, 276 Kan. at 111. The court must not consider what the insurer
intends the language to mean, but what a reasonably prudent insured would
understand it to mean. Id.
Exceptions, limitations, and exclusions are generally construed narrowly. “To
restrict or limit coverage, an insurer must use clear and unambiguous language.
Otherwise, the insurance policy will be construed in favor of the insured.” Id. at 112
(citing Marquis, 265 Kan. at 327).
B. The Sexual Act Exclusion in Form BGL-11. Through Form BGL-11, the policy
excludes “loss of any kind arising directly or indirectly out of or in connection with any
actual or alleged sexual act,” and does so “regardless of other causes or events that
contribute to or aggravate the loss, whether such causes or events act to produce the
loss before, at the same time as, or after the excluded caused or event.” This exclusion
applies except to the extent coverage is granted under the Sexual Acts Endorsement.
The court finds this language unambiguously and clearly precludes coverage for
claims that the church or its elders caused or contributed to the alleged sexual abuse of
M.M. and J.J. by negligently hiring, retaining, or failing to supervise Butler. The same is
true with respect to claims that the sexual abuse was caused by the church’s or elders’
failure to supervise children in their care. All of these claims assert that sexual acts
caused M.M. or J.J. to suffer loss and that unreasonable omissions or acts by the church
and elders caused or contributed to the loss. Such claims are clearly and unambiguously
excluded from coverage by the language of the exclusion. These claims indisputably
arise out of or in connection with a sexual act, and are premised on allegations that
other causes (i.e. negligence by the church and elders) contributed to or produced the
Defendants contend the exclusion does not apply because Kansas determines
coverage from the theory of liability asserted, not from the cause of an injury. For
example, they cite Upland Mut. Ins., Inc. v. Noel, 214 Kan. 145, 519 P.2d 737 (1974), where
the court held an exclusion for liability arising from “operation or use of an automobile”
did not preclude coverage of a claim that the insured negligently entrusted an
automobile to a reckless driver. The court said the action “was not based upon the …
operation [or] use … of … automobiles, even though the immediate cause of the injury
and death was [the driver’s] operation of the automobile.” Rather, “the basis of the …
action was the alleged negligence of the [insured] in knowingly entrusting an
automobile to a … reckless driver,” so the theory of damage “is not directly related to
the … operation [or] use of the vehicle.” Id. at 150.
Defendants cite Catholic Diocese of Dodge City v. Raymer, 251 Kan. 689, 840 P.2d
456 (1992), in which the court addressed an exclusion for property damage caused
intentionally by an insured. In that case, a minor child intentionally caused property
damage, prompting a claim against the child’s parents for negligent supervision. Both
the child and the parents were insureds under the policy. In finding the parents were
entitled to coverage, the court said “Kansas does not look to the underlying cause of the
injury to determine coverage, but to the specific theory of liability alleged.” Id. at 697.
The court also noted that a “severability clause” said the policy would be applied
separately to each insured, and such a provision “requires that policy exclusions are to
be applied only against the insured for whom coverage is sought.” Id. at 698. These
provisions together rendered the policy ambiguous, the court concluded, because they
did not make clear that the intentional act exclusion would apply to the parents if they
were accused only of negligence. Id.
Defendants also cite Marquis, 265 Kan. 317, 961 P.2d 1213 (1998), where the
plaintiff was injured in a car wreck and sued the other driver’s employer. The
employer’s policy excluded coverage for an injury “arising out of … the use or
entrustment … of any … auto.” By a 4-3 vote, the Kansas Supreme Court held this was
ambiguous as to whether it excluded claims against the employer for negligent hiring,
retention, and supervision of the driver. The Supreme Court acknowledged that Upland
represents a minority rule, but reiterated that “Kansas does not look to the underlying
cause of the injury to determine coverage, but to the specific theory of liability.”
Marquis, 265 Kan. at 331 (quoting Catholic Diocese of Dodge City, 251 Kan. at 697).
Therefore, “[t]heories of negligent supervision or control and negligent hiring or
negligent retention of employees are separate and distinct from theories of liability of
negligent entrustment.” Id.
More recently, in Crist v. Hunan Palace, Inc., 277 Kan. 706, 89 P.3d 573 (2004), the
Kansas Supreme Court decided not to overrule Marquis, citing considerations of stare
decisis and observing that “[f]or many years the law in Kansas has been clearly that an
insurance exclusion for damage or injury arising from an automobile will not exclude a
claim based upon negligent supervision.” Id. at 715. See also Continental Cas. Co. v.
MultiService Corp., No 06-2256-CM, 2009 WL 1788422 (D. Kan. June 23, 2009) (relying on
Upland to find that an exclusion of claims arising out of or “in any way involving”
antitrust laws did not apply to a claim for tortious interference with business relations;
noting the latter claim was independent and did not require proof of an antitrust
The court finds the foregoing cases distinguishable because of the particular
language of the Brotherhood policy. The Brotherhood exclusion refers not only to loss
arising directly or indirectly out of a sexual act, or in connection with a sexual act, but
also makes clear the exclusion applies notwithstanding “other causes or events that
contribute to or aggravate the loss”(emphasis added), whether such causes occur
before, during, or after the sexual act. The exclusion thus rules out coverage for claims
that other causes produced or contributed to the loss from a sexual act. See Dkt. 32-3 at
120 (“We do not pay for loss of any kind if one or more of the following excluded
causes or events apply to the loss, regardless of other causes or events that contribute to
… the loss, whether such causes or events act to produce the loss before, at the same
time as, or after the excluded cause or event.”). These terms would clearly indicate to a
reasonable insured that a claim that the church caused or produced loss from a sexual
act by negligently hiring or supervising an employee falls within the exclusion.
Where the policy itself limits coverage by reference to the cause of the loss, the
court cannot rewrite the policy by invoking a rule of law that “Kansas does not look to
the underlying cause of the injury” to determine coverage. The cardinal rule of
interpretation is that “if the policy language is clear and unambiguous, it must be
construed in its plain, ordinary, and popular sense and according to the sense and
meaning of the terms used.” Warner v. Stove, 283 Kan. 453, 456, 153 P.3d 1245 (2007).
Even construing the terms of this exclusion narrowly, the plain import is that a claim
that the church’s negligence contributed to the loss from a sexual act is one “arising
directly or indirectly out of or in connection with any actual or alleged sexual act,”
notwithstanding that “other causes” before the event — i.e. negligence — allegedly
produced or contributed to the loss. Cf. First Fin. Ins. Co. v. Bugg, 265 Kan. 690, 962 P.2d
515 (1998) (exclusion for loss “arising out of assault or battery” precluded claim that bar
owner’s negligence caused or contributed to injury from an assault).
Count I and II of M.M.’s complaint assert claims against Butler for battery and
intentional infliction of emotional distress. (Dkt. 32-1). These claims are barred by the
sexual acts exclusion, as they are arise out of sexual acts as defined by the policy. See
Dkt. 32-1 at 4 (alleging Butler acted “with intent to make physical contact … for
purposes of his own sexual gratification” and that he engaged in “sexual harassment”
and “sexual abuse”). Coverage for these claims, insofar as Butler is concerned, is also
excluded by the intentional/willful act exclusion of the policy. Count III alleges that the
church and its elders negligently inflicted emotional distress upon M.M. through
various actions, including by failing to supervise Butler and failing to safeguard minors
in the church’s care. Count IV makes similar allegations in support of a claim against
the church for negligent supervision. Count V alleges negligent hiring and retention by
the church, which allegedly “caused [M.M.] to suffer injuries as set forth” — i.e., injuries
resulting from sexual acts. All of these claims “arise out of or in connection with” sexual
acts, as Butler’s alleged sexual abuse is alleged to have been a product of the church’s
and elders’ negligence. The same conclusion applies with respect to similar claims by
J.J., including Count I (sexual abuse and battery), Count III (negligent supervision of
pastor), Count IV (negligent supervision of children), Count V (negligent infliction of
emotional distress); and Count VI (negligent false detention or imprisonment).
The court finds that J.J.’s and A.K.’s claim for defamation in Count II stands on a
different footing. The gravamen of this claim is that the claimants suffered damage to
their reputation caused by Butler making false statements from the pulpit to the
congregation. See Hall v. Kansas Farm Bureau, 274 Kan. 263, 50 P.3d 495 (2002) (elements
of defamation are false and defamatory words, communicated to a third person, which
result in harm to the reputation of the person defamed). There is no allegation that this
tortious act caused or contributed to J.J.’s loss from a sexual act. The injury from Butler’s
alleged sexual acts was complete and actionable by the time Butler decided to address
defendants’ credibility and motives in a sermon. Like the tortious interference claim in
Continental Cas. Co., supra, this claim is reasonably regarded as being independent of the
underlying excluded event. Cf. Continental Cas. Co., 2009 Wl 1788422, *4 (“Each claim
has its own, distinct elements.”).
Barring a claim for personal injury that “arises out of” or “in connection with” a
sexual act suggests that there must be some causal connection between the two, but the
exclusion does not explain what that connection must be. The terms can reasonably be
construed as allowing coverage for an act of defamation if it causes a loss that is
separate and distinct from the claimed loss from a sexual act. The fact that the subject of
the defamatory statements in this case included the reported sexual acts, meaning the
claimants might have to prove Butler’s statements about the sexual acts were false, does
not necessarily make this claim one for loss “arising out of” or “in connection with” a
sexual act. The loss from the alleged sexual acts is logically and legally distinct from loss
caused by Butler by defaming the defendants in a sermon. The alleged loss from the
defamation occurred separately, independently and remotely from the alleged sexual
acts, and allegedly caused harm to defendants’ reputation and standing that was not
caused by the sexual acts. If Brotherhood intended to exclude such an apparently
independent claim from coverage, it was obligated to do so more clearly than by
ambiguously excluding claims “arising out of” or “in connection with” a sexual act. The
court concludes this claim is not unambiguously excluded by the sexual acts exclusion.
The court also concludes J.J. and A.K. have met their burden to show that the
defamation claim is covered under the Personal Injury liability component of the
Church Organization additional coverage. This coverage provides in part that
Brotherhood will pay all sums that the church, its leaders, or its employees “become
legally obligated to pay as damages due to personal injury to which this coverage
applies.” To be covered, the events causing injury “must arise out of the religious …
operations” of the church. The policy defines “personal injury” to mean injury arising
out of “oral or written publication of material that slanders or libels a person … or that
violates a person’s right of privacy,” but it does not include “injury arising directly or
indirectly out of or in connection with any sexual act.” Dkt. 32-4 at 146.
Brotherhood again argues the sexual acts exclusion in BGL-11 (including the
above definition of personal injury) bars the claim. Dkt. 32 at 46-47. For the reasons
indicated above, however, the court finds the exclusion does not bar this claim in clear
and unambiguous terms. Brotherhood also argues the claim is not covered because the
policy states that personal injury “does not include ‘bodily injury,’ ‘property damage,’
‘emotional injury,’ or ‘financial damage’ of any kind.” Id. at 46. But Brotherhood does
not explain what “personal injury” does cover, and the coverage for injury from a libel
presumably covers something —such as injury to reputation. In sum, the court finds
J.J.’s and A.K.’s claim for defamation against the church and/or the elders may be
covered by the policy’s Personal Injury Liability Additional Coverage for Church
Organizations, and is subject to a $1,000,000 coverage limit.
C. Duty to Defend.
Brotherhood argues its duty to defend ended with its payment of $300,000 under
the policy’s Sexual Acts Coverage, because Brotherhood “has exhausted all available
coverage available for the claims in the Underlying Lawsuits.” Dkt. 32 at 54. The court
rejects that argument with respect to the claims by J.J. and A.K., as the court has now
determined that the defamation claim by these defendants is subject to coverage under
the Church Organization coverage for personal injury liability, and is subject to a
$1,000,000 coverage limit. Moreover, for the reasons set forth below, the court rejects
Brotherhood’s argument that its duty to defend has terminated with respect to M.M.’s
claims against the church and elders.
Under Kansas law, an insurer generally has a duty to defend whenever there is a
potential of liability under the policy. MGM, Inc. v. Liberty Mut. Ins. Co., 253 Kan. 198,
202, 855 P.2d 77 (1993) (citing Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212
Kan. 681, 512 P.2d 403 (1973)). In this instance, Brotherhood affirmatively promised to
defend any suit seeking damage which may be covered under the commercial liability
policy. Dkt. 32-4 at 85. In BGL-11 it promised to provide the same defense coverage
with respect to additional liability coverages. The GL-100 provision stated that
Brotherhood does not have to provide a defense “after we have paid an amount equal
to the limit as the result of: a. a judgment; or b. a written settlement agreed to by us.” Id.
The court agrees with defendants that a reasonable construction of the latter two
clauses is that Brotherhood is only relieved of its duty to defend when the payment of
the applicable limit results from resolution of claims either through judgment or
settlement. Otherwise, the latter half of the clause would be superfluous. It specifies that
the duty to defend ends when the limit is paid as a result of a judgment or settlement.
Brotherhood has not paid its limit as a result of a judgment or settlement of the
underlying litigation, and its duty to defend is therefore ongoing. See e.g., Conway v.
Country Cas. Ins. Co., 92 Ill.2d 388, 442 N,E,2d 245 (Ill. 1982) (“Our holding that an
insurer cannot discharge its duty to its insured simply by making payments to the
claimant to the extent of its policy’s limits is clearly supported by the language of the
policy here. [T]he policy provided that the insurer could terminate its obligation to
defend … by payments to the policy’s limits of ‘any judgments or settlements.’ The
insurer here … made no payment pursuant to a judgment or settlement agreement.”);
Samply v. Integrity Ins. Co., 476 So.2d 79, 83-84 (Ala. 1985) (an insurer “cannot avoid its
duty to defend against an insured’s contingent liability by tendering the amount of its
policy limits into court without effectuating a settlement or obtaining the consent of the
insured”); Couch on Insurance § 200:50 (3rd ed.) (“Generally, without settlement or the
insured’s consent, an insurer cannot avoid its duty to defend by simply tendering
payment”); 1 Allan. D. Windt, Insurance Claims and Disputes § 4:32 (6th ed.) (“A duty to
defend provision can be expressly made to end when the policy limits are reached.
[footnote omitted] If it is not so limited, resulting in doubt, such doubt should be
resolved against the insurer.”). Brotherhood is therefore still obligated to provide a
defense to the church and the elders in the two underlying cases.
V. Motion for Default Judgment (Dkt. 33)
Brotherhood moves for default judgment against defendant Steven Butler, who
was served with the complaint but who has not answered or otherwise defended the
action. The clerk entered default against Butler on November 21, 2016. (Dkt. 11). Butler
has not appeared or filed a response to the motion for default judgment.
Defendants J.J. and A.K. oppose the motion, arguing it is procedurally improper
because Brotherhood invokes Rule 56 as well as Rule 55 in its motion. Defendants
specifically object “[t]o the extent that entry of Default Judgment against Defendant
Steven Butler affects Brotherhood’s duty to provide indemnification for claims asserted
in the underlying lawsuits….” Dkt. 37 at 3. They otherwise “take no position with
respect to the relief sought by Brotherhood under Rule 55(b)(2)….” Id.
The court finds the motion for default judgment against Butler should be granted
in part. Some of the declaratory relief requested by Brotherhood against Butler is
contrary to the court’s previous findings concerning coverage. See e.g. Dkt. 33 at 3 (“The
same legal arguments set forth in Brotherhood Mutual’s Memorandum in Support for
Summary Judgment concerning all defendants apply to Steven Butler.”). The court
denies the motion for default judgment insofar as any of the relief requested is
inconsistent with the court’s findings concerning Brotherhood’s obligations to the
church and to the elders. The court will otherwise grant the motion with respect to
Brotherhood’s obligations to defendant Steven Butler.
VI. Declaratory Relief
The court declares that Brotherhood’s obligations toward the defendants are as
set forth in the findings of this order.
With respect to the lawsuit filed by M.M. (Doe, et al. v. Butler, et al., No. 12CV1341 (Dist. Ct. of Montgomery Co., Ks.),4 the court determines that Brotherhood’s only
obligation to indemnify Independence Community Christian Church for the claims
asserted therein arose under the Sexual Acts Endorsement in the 2007-2010 insurance
policy, and that Brotherhood has discharged its obligation by paying the applicable
$300,000 limit under that endorsement. The court determines that Brotherhood’s
obligation under the policy to provide a defense to Independence Community Church
is ongoing, however, until entry of a judgment or a settlement consented to by the
With respect to the lawsuit filed by J.J. and A.K. (Doe, et al. v. Butler, et al., No. 16CV000063-P (Dist. Ct. of Crawford Co., Ks), the court determines that Brotherhood’s
obligation to indemnify Community Christian and the defendants identified as elders
included the coverage owed under the Sexual Acts Endorsement and the Personal
Injury Liability Coverage in the Church Organization Additional Coverage of the 2007-
The case was transferred and is now Case No. 16CV000025-G in the District Court of Crawford County,
2010 policy. The latter coverage is subject to a $1,000,000 coverage limit. The court
further determines that Brotherhood’s obligation to provide a defense to the church and
to the elders is ongoing until entry of a judgment or settlement consented to by these
The court determines that Brotherhood has no obligation to indemnify defendant
Steven Butler for any of the claims asserted in either of the two underlying lawsuits and
no further obligation to provide a defense to Steven Butler in the underlying lawsuits.
IT IS THEREFORE ORDERED this 13th day of November, 2017, that A.K.’s
Motion for Summary Judgment (Dkt. 26), T.C.’s Motion for Summary Judgment (Dkt.
29), Brotherhood’s Motion for Summary Judgment (Dkt. 31), and Brotherhood’s Motion
for Default Judgment against Steven Butler (Dkt. 33) are all GRANTED IN PART AND
DENIED IN PART as set forth in this order.
___s/ J. Thomas Marten_____
J. THOMAS MARTEN, JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?