828 F. Supp. 2d 1177
D. Haw.2011Background
- Sea-bright seeks equitable subrogation and equitable indemnity for attorneys’ fees and costs paid in defense of Brewer in Soares’ LHWCA claims.
- The Court previously dismissed breach of contract and equitable indemnity against Brewer, allowing Sea-bright to amend.
- Soares, a Brewer employee, sustained a pre- and post-2005 back injury; Brewer and Matson entered an Asset Purchase Agreement restricting post-cutoff liabilities.
- Sea-bright asserts it is subrogated to Brewer’s rights under the insurance policy and indemnity provisions, seeking fees incurred after Matson allegedly refused defense.
- Matson moves to dismiss or grant summary judgment arguing LHWCA preemption, failure to plead, and lack of American Rule exception; Sea-bright opposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| LHWCA preemption—express | § 905(a) allows subrogation/indemnity claims when independent duties arise. | § 905(a) bars state-law claims unless based on independent duty outside LHWCA. | Preemption not established on this record for equitable subrogation. |
| LHWCA preemption—conflict | Equitable subrogation/indemnity arise from independent contractual duties under the Agreement. | LHWCA balance and § 904/§ 928 preclude fee-shifting between employers; preemption should apply. | Preemption not fully established; equitable subrogation not barred at this stage. |
| Equitable indemnity viability | Indemnity rights exist under the Agreement and Brewer’s rights can be enforced by Sea-bright. | Plaintiff removed compensable elements and lacks an independent duty; equities do not support indemnity. | Equitable indemnity claim denied at this stage; not sufficiently pled to survive. |
| Equitable subrogation viability | Insurer’s payment to defend insured creates subrogation rights to recover fees; rights flow from insured’s claim. | Subrogation requires appropriate loss and rights predate or align with policy terms; misalignment with Agreement. | Equitable subrogation survives; insurers may recover attorney fees where principles and policy support it. |
| American Rule exception | American Rule exceptions apply via equitable subrogation/indemnity; fees authorized by agreement. | No statutory basis for fee-shifting between employers or insurers under LHWCA. | American Rule exception not barred; fees may be charged where authorized by agreement and subrogation. |
Key Cases Cited
- Burnett v. A. Bottacchi S.A. de Navegacion, 882 F.Supp. 1050 (S.D. Fla. 1994) (independent duty may overcome § 905(a))
- Carney v. Marathon Oil Co., 632 F.Supp. 1037 (W.D. La. 1986) (contractual indemnity can support third-party claims against LHWCA employers)
- State Farm Fire & Casualty Co. v. Pacific Rent-All, Inc., 90 Hawai‘i 315, 978 P.2d 753 (Hawai‘i 1999) (insurer subrogation rights depend on loss paid and insured’s rights)
- In re Hamada, 291 F.3d 645 (9th Cir. 2002) (subrogation as derivative right; insurer steps into insured’s shoes)
- Lexington Insurance Co. v. Sentry Select Insurance Co., 2009 WL 1586938 (E.D. Cal. 2009) (loss-payment and insured’s rights govern subrogation; not require insured loss)
- Smith v. Parks Manor, 197 Cal.App.3d 872, 243 Cal.Rptr. 256 (Cal. Ct. App. 1987) (loss through subrogation and indemnity analyzed under California law)
- Continental Cas. Co. v. Zurich Ins. Co., 57 Cal.2d 27, 17 Cal.Rptr. 12, 366 P.2d 455 (Cal. 1961) (subrogation rights and insurer remedies in California doctrine)
- Aetna Cas. & Surety Co. v. Certain Underwriters, 56 Cal.App.3d 791, 129 Cal.Rptr. 47 (Cal. App. 1976) (California understanding of equitable subrogation rights)
- Valentine v. Aetna Ins. Co., 564 F.2d 292 (9th Cir. 1977) (subrogation scope and insurer rights)
- Peter v. Travelers Insurance Company, 375 F.Supp. 1347 (N.D. Cal. 1974) (subrogation rights and insurer remedies)
- Morrison-Knudsen Constr. Co. v. Dir., Office of Worker's Programs, 461 U.S. 624 (U.S. 1983) (LHWCA balance and exclusivity principles)
- Johnson v. National Steel & Shipbuilding Co., 742 F.Supp. 1062 (S.D. Cal. 1990) (third-party indemnity exception to LHWCA preemption)