Arthur v. State, Department of Hawaiian Home Lands.
138 Haw. 85
| Haw. | 2016Background
- Mona Arthur died after falling into a drainage culvert adjacent to a housing development; her husband and her estate sued the developer (Kamehameha Investment Corp. — KIC), the engineer (Sato & Associates and Daniel Miyasato), contractor(s), and others for negligence and related claims.
- KIC had written contracts with Sato, Design Partners, Coastal, and Kiewit containing "indemnify, defend and hold harmless" clauses; Kiewit subcontracted Pacific Fence with similar language.
- KIC tendered defense to its contractors and subcontractors; insurers and multiple tenders followed, and the circuit court apportioned defense obligations and costs among parties for various time periods.
- Sato argued (on appeal and certiorari) that the Hold Harmless Clause should be strictly construed, HRS § 431:10-222 (anti‑indemnity statute) voids contractual indemnity/defense for another’s sole negligence, and Pancakes (applying the complaint‑allegation rule to non‑insurance indemnity contracts) was wrongly applied.
- The ICA affirmed the circuit court relying on Pancakes, holding Sato had a duty to defend KIC upon tender and that the duty encompassed claims that might potentially fall within the indemnity scope.
- The Hawai‘i Supreme Court vacated the ICA judgment, holding: HRS § 431:10-222 renders void defense/indemnity clauses that shift liability for the promisee’s sole negligence; Pancakes does not apply to construction contracts; and in construction contracts the promisor’s duty to defend is determined at the end of litigation (i.e., coextensive with the duty to indemnify).
Issues
| Issue | Plaintiff's Argument (Sato) | Defendant's Argument (KIC) | Held |
|---|---|---|---|
| Whether HRS § 431:10-222 bars contractual defense/indemnity for promisee’s sole negligence | § 431:10-222 should be liberally construed to bar promises to defend for promisee’s sole negligence; such clauses are void as against public policy | Statute targets indemnity for sole negligence but does not address duty to defend; Pancakes remains good law | Held: § 431:10-222 voids clauses that require promisor to defend/indemnify promisee for promisee’s sole negligence or willful misconduct; such defense obligations cannot be enforced |
| Whether Pancakes (importing complaint‑allegation rule to non‑insurance indemnities) governs construction contracts | Pancakes was wrongly decided or inapplicable here; indemnities in construction contracts must be strictly construed | Pancakes is consistent with precedent and reasonable; duties to defend and indemnify are distinct | Held: Pancakes does not apply to construction contracts because the legislature treated construction indemnities differently via § 431:10-222 |
| Timing/scope of contractual duty to defend in construction contracts (trigger at complaint or after adjudication) | Duty to defend should not be triggered until promisor’s liability is shown; otherwise promisor bears costs for claims ultimately excluded | Duty to defend and indemnify are distinct; earlier cases treated duty to defend broadly | Held: For construction contracts, scope of duty to defend is determined at the end of litigation; duty to defend is effectively coextensive with duty to indemnify |
| Whether Sato was required to share defense costs upon KIC’s tender (application to this case) | Sato should not have been apportioned defense costs from tender date; duty only arises if Sato is ultimately liable | KIC relied on prior precedent and contract language to require immediate defense upon tender | Held: Circuit court allocation that required Sato to defend from KIC’s tender (under Pancakes approach) was incorrect; remanded for proceedings consistent with new legal framework |
Key Cases Cited
- Pancakes of Hawaii, Inc. v. Pomare Properties Corp., 944 P.2d 83 (Haw. App. 1997) (applied complaint‑allegation rule to non‑insurance indemnity contract)
- Haole v. State, 140 P.3d 377 (Haw. 2006) (discussed interplay of duty to indemnify and duty to defend under administrative rule)
- Kamali v. Hawaiian Elec. Co., 504 P.2d 861 (Haw. 1972) (indemnity contracts strictly construed against indemnitee)
- Hawaiian Holiday Macadamia Nut Co. v. Industrial Indem. Co., 872 P.2d 230 (Haw. 1994) (describing insurer’s broad duty to defend under complaint‑allegation rule)
- Herson v. New Boston Garden Corp., 667 N.E.2d 907 (Mass. App. Ct. 1996) (state anti‑indemnity statute interpreted not to reach duty to defend)