939 F. Supp. 2d 1059
D. Haw.2013Background
- Plaintiff Imperial Plaza seeks declaratory relief that FFIC must pay benefits under an all-risks policy for arsenic damage to the Building in Honolulu, Hawaii.
- Policy coverage period for the Building spans October 15, 2009 to October 15, 2010 (and similar coverage through 2012 under a separate term).
- The Building’s roof and insulation included an Insulation Layer with canee, a cane-based material treated with inorganic arsenic; moisture and deterioration progressed over time, affecting the fourth-floor slab.
- Tests in 2003–2010 linked moisture in the Insulation Layer to degradation of canee and floor deflections; arsenic contamination was first discovered on June 9, 2010.
- Defendant denied coverage on February 10, 2011; remediation occurred in 2011–2012 without continued insurer consultants, and Plaintiff did not re-tender post-denial.
- Plaintiff asserts continuous or progressive moisture damage and arsenic migration constituted a covered loss; Defendant disputes causation and applicability of exclusions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether denial of coverage ended Plaintiff's cooperative obligations | denial relieved Plaintiff from cooperation duties | Plaintiff breached cooperation by not re-tendering after remediation findings | Denied; Court finds denial breached cooperation, but insured may still pursue coverage under other theories |
| Whether Plaintiff was required to re-tender the claim after Defendant’s denial | no duty to re-tender given post-denial inspection was not requested | re-tender was required after new evidence emerged during remediation | Plaintiff was not obliged to re-tender under the circumstances; denial excused further cooperation |
| Whether the all-risks policy provides coverage for the arsenic damage | continuous moisture ingress and arsenic migration caused direct physical loss within policy period | causation may be from excluded construction defects; pollution exclusions may apply | Yes; moisture infiltration is covered as a separate event; arsenic damage falls within policy’s coverage |
| Whether Category 3 exclusions exclude moisture infiltration and arsenic damage | encompassing exclusions do not apply to moisture infiltration because of an ensuing loss clause | moisture infiltration, if from excluded peril, could be excluded unless an exception applies | Moisture infiltration is covered; ensuing loss clause does not bar coverage for arsenic damage |
| Whether the Pollution Exclusion (and anti-concurrent causation) applies to arsenic damage | arsenic involved pollution but an exception to the exclusion applies when caused by a covered peril | pollution exclusion with anti-concurrent causation could bar coverage | Exception to Pollution Exclusion applies; arsenic damage caused by a covered loss is covered |
Key Cases Cited
- Sentinel Ins. Co. v. First Ins. Co. of Hawaii, 76 Hawai’i 277 (Haw. 1994) (occurrence-based trigger and burden shifting in insurance coverage)
- Best Place, Inc. v. Penn America Ins. Co., 82 Haw. 120 (Haw. 1996) (insurer’s silence and waiver considerations in proof of loss)
- Hart v. Ticor Title Ins. Co., 126 Haw. 448 (Haw. 2012) (liberal construction of adhesion contracts; ambiguities resolved against insurer)
- Aetna Cas. & S. Co. v. Yates, 344 F.2d 939 (5th Cir. 1965) (distinguishes dampness from direct water damage; applies evolving coverage concepts)
- Vision One, LLC v. Philadelphia Indem. Ins. Co., 276 P.3d 300 (Wash. 2012) (enforcing the Ensuing Loss Clause and determining coverage when an excluded peril leads to a covered loss)
- National Union Fire Ins. Co. of Pittsburgh, Pa. v. Cagle, 68 F.3d 905 (5th Cir. 1995) (insurer need not prove insured’s information disclosure if not requested; diligent information gathering required)
- Turley v. Fidelity and Deposit Ins. Co. of Maryland, 928 P.2d 298 (Okla. 1996) (majority rule on cooperation duty after denial of coverage)
- Acme Galvanizing Co. v. Fireman’s Fund Ins. Co., 221 Cal.App.3d 170 (Cal. Ct. App. 1990) (enforcing Ensuing Loss Clause; distinction between latent defect and separate hazards)
- Boardwalk Condominium Ass’n v. Travelers Indem. Co. of Illinois, 2007 WL 1989656 (S.D. Cal. 2007) (illustrates applicability of ensuing loss when excluded and included perils interact)