882 F. Supp. 2d 1180
D. Haw.2012Background
- State Farm filed a declaratory judgment action seeking no duty to defend/indemnify related to a underlying action.
- Bennets (the sellers) sued Defendants for alleged undisclosed defects in a Honolulu property sold on June 25, 2009; Defendants were insured under State Farm Homeowners and Umbrella policies.
- Underlying claims include breach of contract, breach of implied covenant, fraud, misrepresentation, negligence, unjust enrichment, unfair/deceptive trade practices, and punitive damages.
- State Farm argues theUnderlying Action alleges nondisclosures pre-dating the sale, not bodily injury or property damage caused by an occurrence, thus not within policy coverage.
- The Court analyzes whether the claims constitute covered property damage/occurrence, and applies the owned property and intentional acts exclusions to determine coverage.
- Court grants State Farm’s motion for summary judgment, concluding no duty to defend or indemnify under either policy; punitive damages issues and fee reimbursements remain separately.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Underlying Action triggers a duty to defend under the Homeowners/Umbrella policies | State Farm: claims are contractual/non-occurrence; no covered property damage | Chungs: underlying claims may involve covered damages/occurrence | No duty to defend or indemnify; claims do not arise from a covered occurrence; exclusions apply. |
| Whether the claims constitute a covered ‘property damage’ or ‘loss’ under the policies | No property damage caused by an occurrence; nondisclosures predate sale | Not covered; nondisclosure premised on contract, not property damage or loss. | |
| Applicability of the owned property exclusion | Damage occurred while insureds owned the property; exclusion applies | Owned property exclusion applies; bars coverage. | |
| Applicability of the intentional acts exclusion | Exclusion precludes coverage for intentional acts | Court does not reach this, but exclusion would preclude if applicable. | |
| Whether any punitive damages or attorney’s fees are recoverable under the policies | Punitive damages not covered absent explicit provision | Punitive damages not covered; fee/fee-shifting issues reserved for separate ruling. |
Key Cases Cited
- Dairy Road Partners v. Island Ins. Co., Ltd., 92 Hawai’i 398 (Haw. 2000) (complaint-allegation rule; duty to defend limited to pleaded coverage)
- Guajardo v. AIG Haw. Ins. Co., Inc., 118 Hawai’i 196 (Haw. 2008) (ambiguous terms resolved against insurer; liberal construction for insured)
- Del Monte Fresh Produce (Haw.), Inc. v. Fireman’s Fund Ins. Co., 117 Hawai’i 357 (Haw. 2007) (reasonable expectations in insurance contracts)
- Hawaiian Holiday Macadamia Nut Co., Inc. v. Indus. Indem. Co., 76 Hawai’i 166 (Haw. 1994) (intentional acts/exclusions; contract-based claims not ‘occurrence’)
- Barzingus v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (arbitration/summary judgment standard reference)
- Andrews v. Safeco Insurance Co. of America, 915 F.2d 500 (9th Cir. 1990) (negligent misrepresentation not an ‘occurrence’)