347 P.3d 163
Haw.2015Background
- In March 2006 the Ka Loko (Kaloko) Dam breached, killing seven and causing major property damage; C. Brewer previously owned the system and had formed a subsidiary (KIC) to operate it and sold the reservoir land to Pflueger.
- Pflueger sued Pflueger v. State and C. Brewer was later sued by Pflueger; C. Brewer tendered defense to James River under a commercial general liability (CGL) policy effective at the time of the breach.
- James River refused defense and moved for summary judgment, arguing a "Limitation of Coverage to Designated Premises Endorsement" (DPE) on the policy limited coverage to injuries occurring on specifically scheduled premises (the Dam was not listed).
- The circuit court granted summary judgment for James River; the ICA reversed, finding the DPE ambiguous and remanding to determine the parties’ intent.
- The Hawai‘i Supreme Court held that the DPE covers bodily injury and property damage that "arise out of" the ownership, maintenance, or use of a designated premises even if the injury occurs off-premises, applying a causal-connection standard, and that the DPE did not unambiguously convert the CGL into a premises-only policy.
Issues
| Issue | Plaintiff's Argument (C. Brewer) | Defendant's Argument (James River) | Held |
|---|---|---|---|
| Scope of DPE: whether coverage extends to injuries off listed premises that "arise out of" use of a designated premises | "Arising out of" creates a causal-connection test; negligent decisions at designated HQ can cause off-premises injury and so are covered | DPE unambiguously limits coverage to injuries occurring on premises listed in Schedule; Dam not listed so no coverage | Held for Brewer: DPE covers injury off-premises if it causally arises out of ownership/maintenance/use of a designated premises (adopting causal-connection test from American Guarantee) |
| Whether DPE must be "clear and unequivocal" to convert a CGL into a premises-only policy | DPE language and other policy provisions (broad coverage territory; inclusion of personal/advertising injury) show CGL scope and do not plainly restrict to listed premises | Language should be read to restrict coverage to listed premises, effectively creating a premises policy | Held for Brewer: a DPE must be "clear and unequivocal" to convert a CGL to a premises policy; James River’s DPE is not sufficiently clear to do so |
| Effect of classification limitation endorsement ("Description of Business: Real Estate Owners") | Endorsement refers to operations, not premises, and is ambiguous; allegations implicate C. Brewer as a real estate owner/operator so coverage may apply | Endorsement shows policy intended to cover only listed real‑estate owner operations and not the Dam | Held for Brewer: endorsement is ambiguous and supports coverage; ambiguities construed against insurer |
| Whether parties’ intent must be resolved (ICA remand) | Parties’ intent issue appropriate because DPE ambiguous | DPE unambiguous so no fact issue | Held against ICA: no remand needed on intent as DPE, properly construed, provides coverage under causal-connection rule |
Key Cases Cited
- American Guarantee & Liability Ins. Co. v. 1906 Co., 129 F.3d 802 (5th Cir. 1997) (adopts causal-connection meaning of "arising out of" to allow off-premises coverage when injuries originate from use of designated premises)
- Union Am. Ins. Co. v. Haitian Refugee Ctr., 858 So.2d 1076 (Fla. Dist. Ct. App. 2003) (construed a DPE to confine coverage to designated premises and rejected extending coverage to unrelated off-premises operations)
- Am. Empire Surplus Lines Ins. Co. v. Chabad House of N. Dade, Inc., 771 F. Supp. 2d 1336 (S.D. Fla. 2011) (DPE must be clear and unequivocal to convert CGL into a premises-only policy)
- Dairy Rd. Partners v. Island Ins. Co., 92 Hawai‘i 398, 992 P.2d 93 (Haw. 2000) (insurance policies interpreted in favor of insured; summary judgment standard)
- Sentinel Ins. Co. v. First Ins. Co. of Hawai‘i, 76 Hawai‘i 277, 875 P.2d 894 (Haw. 1994) (insurer’s duty to defend depends on whether underlying claim raises possibility of coverage)