Delarosa v. Liberty Mutual Ins. Co.Delarosa v. Liberty Mutual Ins. Co.
INTRODUCTION
This is an insurance dispute arising out of a May 2021 car accident in which Plaintiffs, Francisco DelaRosa and Sarah Lindsey Yeager, suffered severe injuries. The car that collided with Plaintiffs was a rental. But it was not owned by a rental company. Instead, it had been rented through Turo Inc., a peer-to-peer car sharing platform that connects the individual owners of vehicles with other individuals seeking to rent them.
Four insurance policies were in play: the vehicle owner‘s personal policy, the rental driver‘s personal policy, and two policies that had been issued to Turo by Liberty Surplus Insurance Corporation (Liberty Mutual).1 The owner‘s and driver‘s personal insurance companies denied coverage, and Plaintiffs do not challenge those decisions here. Instead, Plaintiffs have brought this declaratory judgment action against Liberty Mutual. In Plaintiffs’ view, the more favorable of Liberty Mutual‘s policies should apply to the accident. And while the policy does not apply on its own terms, Plaintiffs contend that it should be rewritten so that it does.
The parties have stipulated to the relevant facts and now both move for summary judgment, each contending that they are entitled to prevail as a matter of law. Because Plaintiffs have not carried their burden of showing that Hawaiʻi law or public policy permits the Court to rewrite the more favorable insurance policy so that it covers the accident, the Court DENIES Plaintiffs’ motion for summary judgment. And because Plaintiffs have offered no other ground for relief, the Court GRANTS Defendant‘s motion for summary judgment.
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BACKGROUND
A. Turo Insurance Coverage Gap
In Hawai‘i, vehicle owners are required by statute to provide the state minimum
In response, the Hawaiʻi legislature enacted Act 56, which provides insurance requirements for peer-to-peer car sharing. See 2022 Haw. Sess. Laws Act 56, §§ 1-5 at 101-06. At the time of the accident here, however, that law had not yet been enacted. This case therefore presents a coverage issue emerging from a discrete and limited time period: after insurance companies began to exclude peer-to-peer car sharing platforms from coverage, but before Act 56 took effect.
In that period, Turo sometimes plugged the gap in coverage by obtaining insurance policies that it would then offer to the renter and owner of the vehicle. For example, Turo would sometimes obtain a policy from an insurance company that covered both the renter and the owner. And Turo would sometimes also obtain a policy that provided coverage just to the owner. Turo would then make those policies available to the renter and owner for a fee. Here, Turo did just that.
B. The Car Accident and Ensuing Insurance Dispute
The parties have stipulated to the material facts. They agree that the accident occurred on May 15, 2021. ECF No. 17, at PageID.85 (Pls.’ Concise Statement of Facts (CSF) ¶ 1); see ECF No. 22, at PageID.264-65 (Def.‘s CSF) (facts undisputed). Plaintiff Francisco DelaRosa drove one car, with Plaintiff Sarah Lindsey Yeager in the passenger seat. ECF No. 17, at PageID.85 (¶ 1). Rubin Minnekhanov drove the other vehicle, which was a Turo rental car owned by Gabriel Rojo. Id. (¶¶ 1, 3). The car Minnekhanov was driving collided with Plaintiffs’ car head-on, resulting in severe bodily injuries to Plaintiffs. Id. (¶ 1).
As explained above, an owner‘s personal automobile insurance would typically cover liability for all permissive users of their car. And Rojo—the vehicle owner, or the “Host” in Turo‘s terminology—carried personal automobile insurance with the United Services Automobile Association (USAA). Id. at PageID.87 (¶ 15). Rojo knew, however, that his personal automobile insurance would not cover his vehicle while it was being rented through Turo. ECF No. 29, at PageID.300. To cover that gap, Rojo had purchased a special insurance policy through Turo, which Plaintiffs label the “Host Policy” (Policy No. ASE-631-510574-010). Id.; ECF No. 17, at PageID.86 (¶ 7). Meanwhile, Minnekhanov, the car driver and Turo “Guest,” separately purchased from Turo the state minimum liability insurance for his trip. ECF No. 17, at PageID.87 (¶ 16). Plaintiffs label that the “Guest Policy” (Policy No. ASE-631-510574-050). Id. (¶ 17).
Turo, in turn, had obtained both policies from Liberty Mutual. Id.; id. at PageID.86 (¶ 7). Both policies incorporate a “Coverage Form” (technically known as the “ISO Business Auto Coverage Form CA 00 01 03 10“), which generally says that Liberty Mutual will pay all sums that an “insured” legally must pay as a result of an accident involving a covered vehicle. ECF No. 17-1, at PageID.92 (Stip. of Facts ¶ 5). The Host
The policies differ in these two key respects. First, the Host Policy expressly covers the Host, among other insureds, but it does not cover any Guest. ECF No. 17-4, at PageID.172. The Guest Policy, on the other hand, covers both the Guest and Host, among other insureds. ECF No. 17-3, at PageID.135. For the purposes of this lawsuit, the most consequential distinction between the two policies is their respective coverage limits: while the Host Policy covers the greater of (1) the state minimum or (2) $750,000, ECF No. 17, at PageID.87 (¶ 12), the Guest Policy offers only the state minimum liability insurance—which, in Hawaiʻi, is $20,000 per person for bodily injury, id. at PageID.88 (¶¶ 21-22).2 In other words, the Host Policy is the more favorable of the two policies.
Following the collision, car owner Rojo‘s personal automobile insurer, USAA, denied coverage for the collision, as expected. Id. at PageID.87 (¶ 15). And so did driver Minnekhanov‘s personal automobile insurance carrier, GEICO. Id. at PageID.89 (¶ 24).
As settlement for Plaintiffs’ injuries, Liberty Mutual tendered its policy limit of $20,000 per person for bodily injury under the Guest Policy. Id. (¶ 25). Plaintiffs rejected the offer. Id. (¶ 26). They claimed, instead, that Liberty Mutual owed the $750,000 of coverage available under the Host Policy. Id. Liberty Mutual refused to provide the higher coverage. Id.
Unable to reach a resolution, on April 25, 2023, Plaintiffs filed a complaint in the Circuit Court of the First Circuit, State of Hawaiʻi, seeking a declaratory judgment that they are entitled to the higher $750,000 coverage amount. Id. (¶ 27). Liberty Mutual then removed the case to this Court on diversity of citizenship grounds. Id. (¶ 28).
C. Cross-Motions for Summary Judgment
Both parties now move for summary judgment based on the stipulated facts. In their motion, Plaintiffs assert that because Hawaiʻi law and public policy places the responsibility for obtaining automobile insurance on the car owner, the Turo Host Policy must be rewritten to cover the Guest, and that policy—not the Guest Policy—must operate as the primary insurance coverage for their accident, entitling them to access $750,000 of coverage. In its cross-motion, Liberty Mutual contends that the policies’ plain terms should control, under which only the Guest Policy covers the driver, leaving Plaintiffs with $20,000 each.
The Court held a hearing on the cross-motions for summary judgment on August 15, 2024. ECF No. 34.
SUMMARY JUDGMENT STANDARD
Summary judgment is warranted where a movant shows there is no genuine dispute as to any material fact and they are entitled to judgment as a matter of law.
DISCUSSION
This is a diversity action, and so the Court looks to Hawaiʻi state law on the substantive issues. See Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 1090 (9th Cir. 2001). Accordingly, the decisions of the Hawaiʻi Supreme Court are binding. See Ariz. Elec. Power Co-op., Inc. v. Berkeley, 59 F.3d 988, 991 (9th Cir. 1995). And where there is no case on point, the Court must predict how the state supreme court would decide the issue, considering as guidance other Hawaiʻi court decisions, as well as decisions from other jurisdictions, statutes, treatises, and restatements.3 Id.
Under Hawai‘i law, insurance policies are “subject to the general rules of contract construction“; that is, where unambiguous, the plain language and literal meaning of the terms control. Dairy Rd. Partners v. Island Ins. Co., 92 Hawaiʻi 398, 411, 992 P.2d 93, 106 (2000) (quoting First Ins. Co. of Hawaiʻi, Inc. v. State, 66 Haw. 413, 423-24, 665 P.2d 648, 655 (1983)). In addition, insurers “have the same rights as individuals to limit their liability and to impose whatever conditions they please on their obligation,” with the caveat that they may only do so to the extent permitted by state law. Id. (brackets omitted) (quoting First Ins., 66 Haw. at 423, 665 P.2d at 655). A clause that violates a state statute or public policy is invalid. Id.
The parties agree that the Host Policy at issue in this case unambiguously excludes the Guest from coverage. Plaintiffs nonetheless seek to invalidate that exclusion as a matter of Hawaiʻi law or public policy. Accordingly, Plaintiffs bear the burden of showing the statutory or public policy grounds for rewriting the contract. If they are unable to do so, the plain meaning of the policy controls, and Plaintiffs may recover only under the Guest Policy.
1. One way in which the Plaintiffs might have carried their burden would have been to show that Hawaiʻi statutory law requires that Liberty Mutual‘s Host Policy be rewritten. Plaintiffs do not press this point, however—they do not identify language in any state statute that would, of its own force, authorize the Court to grant their requested relief. And the Court sees none.
In this case, Liberty Mutual does not own the vehicle at issue, and it therefore has no direct obligations under the state statute. Nor did Liberty Mutual enter into any agreement with the owner of the vehicle. Instead, Liberty Mutual issued the Host Policy and Guest Policy to Turo. It is, therefore, unclear why Liberty Mutual
Plaintiffs offer no answer. They propose no interpretation of
2. Plaintiffs assert that it does exist elsewhere: in Hawaiʻi public policy. They argue that
In Bowers, the Hawai‘i Supreme Court rejected a traditional rental car company‘s attempt to contract away the primary responsibility for its renters’ insurance coverage. Id. The rental company, Alamo Rent-a-car, Inc., was both car owner and insurer; in other words, it rented its cars and sold insurance plans to customers. Id. at 275, 965 P.2d at 1275. The collision policy it sold to drivers had an “escape clause,” which stated that the policy would cover the state minimum
liability insurance only if no other insurance was available to the driver. Id. And so when the plaintiff customer suffered a collision while driving an Alamo rental, Alamo argued that solely the plaintiff‘s personal automobile insurance, and not Alamo‘s own policy, covered his collision. Id.
The Hawai‘i Supreme Court acknowledged that, regardless of the result it reached, the vehicle would have had the state minimum insurance coverage for that collision. Id. at 278, 965 P.2d at 1278. But that fact did not, in itself, satisfy Hawai‘i law. Id. Under
Plaintiffs contend that Bowers requires this Court to similarly void the Host Policy‘s endorsement that excludes the Guest as an insured. Plaintiffs’ argument, however, suffers from a fatal flaw. Although Plaintiffs colloquially refer to one Turo policy as the “Host Policy” and the other as the “Guest Policy,” the parties acknowledge that the plain terms of both policies cover the Host as an insured. Put another way, the policy that Plaintiffs call the “Guest Policy” could just as fairly be called a “Host” policy—or, more accurately, a “Guest-and-Host” policy.
That makes this case fundamentally different from Bowers, in which Alamo—there the owner of the vehicles—sought to shift liability to insurance policies that were personal to its customers. As noted, the Hawaiʻi Supreme Court rejected Alamo‘s approach because it is the vehicle owner who must provide minimum coverage for their vehicle. That meant, in Bowers, that Alamo had to provide the coverage itself and could not contractually shift that legal obligation to anyone else. What it means in this case, however, is a different matter. Here, allowing the Guest Policy to apply on its terms would not amount to allowing the vehicle owner to shift his legal obligation to anyone else, as happened in Bowers. That is because the Guest Policy covers both the driver and the owner. And there is, therefore, no reason under Bowers why the Court should rewrite the Host Policy (which only covers the Host) to apply to the accident in this case, when the Guest Policy—or, again, what is really the Guest-and-Host Policy—is just as capable of satisfying the owner‘s obligation to supply the required minimum coverage without the need for any rewriting at all.
Plaintiffs concede that the Guest Policy covers the Host, but they dispute the significance of that fact. In their view, to comply with state insurance law, the owner‘s policy must cover not just the vehicle owner, but rather the vehicle itself.
That may be a fair interpretation of state public policy. But even if it were, it would not advance Plaintiffs’ position. Plaintiffs point to no distinction between the two policies that suggests that the Host Policy covers the vehicle, while the Guest Policy does not.5 When the policy that by its terms applies is as good a fit as the policy Plaintiffs would have the Court rewrite, the Court cannot claim authority to rewrite the preferred policy.
That is especially so because there is another insurance policy here that covers the vehicle: the personal automobile insurance policy that Rojo purchased through USAA. Granted, USAA chose to exclude Turo uses from that coverage. But if the Court truly had the authority to disregard Liberty Mutual‘s decision to exclude the Guest from its Host Policy, there would be no principled reason—certainly no reason evident in Bowers—why it would not be more appropriate to rewrite the USAA policy instead.
Plaintiffs answer that Liberty Mutual‘s Host Policy must be rewritten under Bowers because the vehicle owner, Rojo, purchased that policy from Turo himself, whereas the Guest Policy was purchased by the driver. But once again, this argument assumes that Liberty Mutual is the
requires rewriting insurance policies so that vehicles are covered by policies the vehicle owner themselves purchase, it would not be more appropriate to rewrite the policy that Rojo himself purchased from USAA. And even if Liberty Mutual were the only insurance company involved here, Plaintiffs still would not have shown that, under Bowers, the fact that Turo charged the Guest an extra fee for the Guest Policy, rather than the Host, should be dispositive. After all, Plaintiffs acknowledge that the Guest Policy was mandatory, and so no trip could have been taken without both the Host and Guest benefitting from its coverage. By virtue of using Turo‘s services, therefore, the Host automatically obtained the necessary minimum coverage under the Guest Policy. And Plaintiffs point to nothing in Bowers that requires a vehicle owner to take a more proactive approach in how they meet their minimum coverage responsibility. Nor have Plaintiffs shown why, under Bowers, the Court would be authorized to rewrite a more favorable Host Policy merely because a less favorable (but legally sufficient) Guest Policy had been obtained in an automated or routinized way.6
These conclusions draw support from an earlier decision in this District, Talana v. Liberty Surplus Insurance Corp., 2023 WL 2632219, which is not binding, but which is persuasive authority nonetheless. In that case, the plaintiff had also relied on Bowers as public policy grounds for rewriting a Turo insurance policy, but Judge Susan Oki Mollway rejected the argument. Id. at *5. A single policy covered the car owner, the driver, the car itself, and Turo (much like the Guest Policy here). Id. at *1. The policy distinguished between limits for each insured party: the limit for nonowner drivers was $50,000, while the limit for the owner was a significantly higher $1,000,000. Id. The plaintiff, who had suffered injuries in a collision with a car driven by a Turo Guest, sought a declaratory judgment that as a matter of statutory interpretation or public policy, the higher policy limit of $1,000,000 should cover his injuries. Id. at *1, 3. Judge Mollway disagreed, and she granted summary judgment in favor of the insurer. Id. at *5-6. In doing so, she distinguished Bowers as addressing the primary nature of a car owner‘s insurance policy, not “whether an owner‘s coverage limit should be applied to all others.” Id. at *5.
Plaintiffs seek to differentiate Talana on the ground that it involved a collision that occurred before insurance companies began to exclude Turo from their customers’ personal automobile policies. ECF No. 16-1, at PageID.80. And so Talana, Plaintiffs suggest, addressed only Liberty Mutual‘s obligations
regarding two competing “excess” insurance limits, where the primary coverage had already been met by the owner‘s personal automobile insurance. Id.
Talana is factually distinct on those grounds, but its reasoning still has force here. By arguing that the Court should rewrite the more favorable Host Policy instead of simply applying the Guest Policy, Plaintiffs effectively argue that car insurance policies cannot treat an owner more favorably than a driver. As Talana
For these reasons, the Court concludes that Plaintiffs have not met their burden to show any state law or public policy reason for rewriting the Turo policies so that the more favorable of the two—both of which cover the Host—also covers the Guest.
3. As a final argument in support of rewriting the insurance policies, Plaintiffs make a general appeal to equitable principles. But Plaintiffs point to no specific legal doctrine that would backstop this argument, and in any case, it lacks an adequate evidentiary basis in the summary judgment record.
Plaintiffs urge that equity requires rewriting the Host Policy to cover the Guest, because a Turo Host would not purchase the Host Policy if they did not believe they needed to do so to meet the state law requirements. In support, Plaintiffs submit a declaration from Rojo indicating that he purchased the Host Policy for that very purpose. ECF No. 29, at PageID.299-300. In addition, they submit screenshots of the Turo website, id. at PageID.301-09, which they allege show that the Host Policy is marketed and sold as a way for a vehicle owner to meet their minimum coverage requirements, id. at PageID.293-94.
Along these lines, Plaintiffs further posit that it would be against public policy to allow Liberty Mutual—who, they say, must have known that Turo would sell, and Hosts would purchase, the Host Policy on that basis—to now dodge liability. Plaintiffs’ argument, however, rests on speculation. Even assuming Plaintiffs’ submissions show that Turo was aware of that misunderstanding—and, taking it a step further, assuming that Turo intentionally marketed and sold the Host Policy based upon that misunderstanding—Plaintiffs have produced no evidence showing that Liberty Mutual did so. And Liberty Mutual, not Turo, is the defendant in this case.
Plaintiffs rejoin that Liberty Mutual is a sophisticated market participant and surely would have known that car owners would purchase the Host Policy to meet their state minimum coverage requirements. But Plaintiffs have offered no evidentiary basis to conclude that Liberty Mutual would have known these things either generally or in Rojo‘s case in particular. First, they have produced no evidence that Liberty Mutual knew (or should have known) that Rojo‘s personal automobile insurance did not cover his car while it was rented on Turo—or that Liberty Mutual knew, in this time period, that insurance companies had begun to exclude Turo uses. Nothing in the parties’ stipulated facts, nor any declaration or other evidence, supplies that evidentiary grounding. Furthermore, Rojo could have purchased a separate business insurance policy from his personal automobile insurer, and Plaintiffs have produced no evidence showing that Liberty Mutual knew (or should have known) that he did not do so. Nor have Plaintiffs supplied any evidentiary basis from which the Court could infer that Liberty
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To succeed on their motion, Plaintiffs must show that Hawaiʻi state law or public policy requires this Court to rewrite the Host Policy to also cover the Guest. They have not met that burden. And they offer no other legal theory or factual basis for liability, equitable or otherwise. The Court therefore cannot conclude that Plaintiffs are entitled to the higher $750,000 insurance coverage limit contained in the Host Policy. Accordingly, Plaintiffs are not entitled to a declaratory judgment to that effect.
The final question, then, is whether Liberty Mutual is entitled to judgment as a matter of law. In this case, the material facts are uncontested. The driver was covered as an insured under the Guest Policy, but not the Host Policy. The sole proffered evidence shows that the Guest Policy provides the minimum state
liability coverage for Rojo, since the plain terms of the Guest Policy also expressly cover the Host. And as noted, Plaintiffs have offered no viable legal theory or factual basis on which they could rewrite the policies to secure judgment. Accordingly, Liberty Mutual is entitled to judgment as a matter of law.
CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion for Summary Judgment, ECF No. 16, is DENIED, and Defendant‘s Motion for Summary Judgment, ECF No. 21, is GRANTED.
IT IS SO ORDERED.
DATED: September 18, 2024, at Honolulu, Hawaiʻi.
/s/ Micah W.J. Smith
Micah W.J. Smith
United States District Judge
Civil No. 23-00267 MWJS-RT; Francisco Delarosa and Sarah Lindsey Yeager v. Liberty Mutual Ins. Co.; ORDER DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT‘S MOTION FOR SUMMARY JUDGMENT