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Allstate Insurance Company v. Julia K.S. Riihimaki

May 30, 2012


The opinion of the court was delivered by: Alan C. Kay Sr. United States District Judge


For the following reasons, the Court GRANTS Allstate's Motion for Summary Judgment, and DENIES Defendant's alternative Motion for a Continuance Pursuant to Fed. R. Civ. P. 56(d).


Plaintiff (hereinafter "Plaintiff" or "Allstate") filed the Complaint against the defendant (hereinafter "Defendant" or "Riihimaki") on August 30, 2011, seeking a declaration that Plaintiff has no duty to defend or indemnify Defendant, or to provide any other insurance coverage to Defendant under the relevant homeowners policy in Defendant's underlying lawsuit (the "Underlying Lawsuit"). Compl. at 7. On September 22, 2011, Defendant filed an Answer to the Complaint. (Doc. No. 6.)

Plaintiff filed a Motion for Summary Judgment on March 12, 2012 (Doc. No. 13, the "MSJ"), as well as a memorandum in support of the motion (Doc No. 13-1, the "Mem. in Supp. of MSJ"). On the same day, Plaintiff filed a Statement of Undisputed Facts in support of its motion. (Doc. No. 14, the "CSF"). On April 20, 2012, Defendant filed a memorandum in opposition to the Motion for Summary Judgment (Doc. No. 16, "D's Opp. Mem."), as well as a response to the Concise Statement of Facts (Doc. No. 17, "D's Response to CSF"). Plaintiff filed a reply to Defendant's response on April 30, 2012. (Doc. No. 19, "P's Reply.)

This Court held a hearing on Plaintiff's Motion for Summary Judgment on Monday, May 14, 2012. The Court directed the parties to submit supplemental briefs regarding whether there is a duty to defend because of references to "embarrassment" in the underlying suit's complaint and/or because of the possibility of an amended complaint being filed in the underlying action. On May 17, 2012, Plaintiff and Defendant filed supplemental briefs addressing this issue. (See Doc. Nos. 21, 22, hereinafter respectively "D's Supp. Mem." and "P's Supp. Mem.")


A. The Underlying Action

On June 6, 2011 Young Hui Kim ("Kim," not a party to this action) filed a complaint against Defendant in the First Circuit Court, State of Hawaii, encaptioned Young Hui Kim v. Julia Kyung Soon Riihimaki, et al., Civ. No. 11-1-1139-06, in the Underlying Lawsuit. CSF ¶ 1. The complaint alleges that Kim owned a residential property located in Kaneohe, Hawaii (the "Property"). Id. ¶ 2. In or about April 2008, Defendant allegedly entered into an Agreement of Sale to purchase the Property from Kim for $1,150,000, to be paid with a down payment of $300,000 and a balance of $850,000. Id. ¶ 3. Defendant allegedly was unable to secure financing and forced Kim to sign a promissory note and execute a mortgage on the Property in Defendant's favor. Id. ¶ 4. The complaint alleges that Defendant forced Kim to convey the Property to her by way of a warranty deed, although the Agreement of Sale was never consummated and Defendant never paid the remaining $850,000 to Kim or accounted for rental payments paid to Defendant by tenants residing on the Property. Id. ¶ 5.

The complaint alleges the following causes of action:

Quiet Title, Unfair and Deceptive Trade Practice, Breach of Contract, Unjust Enrichment, Conversion, Accounting, Injunctive Relief, Constructive Trust, and Punitive Damages. Id. ¶ 5. Additionally, the complaint prays for the following relief: return of possession and marketable title, damages for breach of contract, an order allowing a notice of pendency of the action, disgorgement of funds wrongfully collected, a temporary restraining order, and special, general, treble and/or punitive damages, as well as attorney's fees and costs. Id. ¶ 7. Although the complaint does not present a claim for defamation, it does allege that Riihimaki "compelled" Kim to sign a promissory note under "threats of coercion, lawsuits and embarrassment." (CSF, Ex. A at 3.)

Defendant tendered defense of the Underlying Lawsuit to Plaintiff, and Plaintiff is defending the action under a reservation of rights. Id. ¶ 8. At all relevant times, Defendant was the named insured under an Allstate Deluxe Plus Homeowners Policy, No. 920801493 (the "Homeowners Policy"). Id. 9.

B. The Insurance Policy

At the time of the underlying claims, Defendant was insured under the Homeowners Policy, which provided the following coverage:

Section II Family Liability and Guest Medical Protection Coverage X Family Medical Protection Subject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies and covered by this part of the policy.

MSJ Ex. B, Form AP337, at 19. "Occurrence" is defined in the Policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions during the policy period, resulting in bodily injury or property damage." Id. at 3.

"Bodily injury" is defined as "physical harm to the body, including sickness or diseases, and resulting death . . . ." Id. at 2. "Property damage" is defined as "physical injury to or destruction of tangible property, including loss of its use resulting from such physical injury or destruction." Id. at 3.

The liability coverage provided in Coverage X is subject to the following relevant exclusions:

Losses We Do Not Cover Under Coverage X

1. We do not cover any bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person. . . .*fn2

Id. at 19.

15. We do not cover any liability an insured person assumes arising out of any contract or agreement.

Id. at 21.

Allstate seeks a declaration that it has no duty to defend or indemnify Riihimaki in the Underlying Lawsuit pursuant to the Homeowners Policy.


A. Summary Judgment Standard

The purpose of summary judgment is to identify and dispose of factually unsupported claims and defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 323--24 (1986). Summary judgment is therefore appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion," and can do so in either of two ways: by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials"; or by "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1).

"A fact is 'material' when, under the governing substantive law, it could affect the outcome of the case. A 'genuine issue' of material fact arises if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Thrifty Oil Co. v. Bank of Am. Nat'l Trust & Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).*fn3 Conversely, where the evidence could not lead a rational trier of fact to find for the nonmoving party, no genuine issue exists for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).

The moving party has the burden of persuading the court as to the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323; Miller v. Glenn Miller Prods., 454 F.3d 975, 987 (9th Cir. 2006). The moving party may do so with affirmative evidence or by "'showing'-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325.*fn4 Once the moving party satisfies its burden, the nonmoving party cannot simply rest on the pleadings or argue that any disagreement or "metaphysical doubt" about a material issue of fact precludes summary judgment. See Celotex, 477 U.S. at 324; Matsushita Elec., 475 U.S. at 586; Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987).*fn5

The nonmoving party must instead set forth "significant probative evidence" in support of its position. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting First Nat'l, 391 U.S. at 290). Summary judgment will thus be granted against a party who fails to demonstrate facts sufficient to establish an element essential to his case when that party will ultimately bear the burden of proof at trial. See Celotex, 477 U.S. at 322.

When evaluating a motion for summary judgment, the court must construe all evidence and reasonable inferences drawn therefrom in the light most favorable to the nonmoving party. See T.W. Elec. Serv., 809 F.2d at 630--31.*fn6 Accordingly, if "reasonable minds could differ as to the import of the evidence," summary judgment will be denied. Anderson, 477 U.S. at 250--51.

B. An Insured's Duty to Defend or Indemnify Under Hawaii Law

Hawaii law provides for a broad duty to defend whenever the pleadings raise a potential for indemnification liability of the insurer to the insured. Burlington Ins. Co. v. Oceanic Design & Constr., Inc., 383 F.3d 940, 944 (9th Cir. 2004); First Ins. Co. of Hawaii, Inc. v. Hawaii, 665 P.2d 648, 653 (Haw. 1983). "The duty to defend exists irrespective of whether the insurer is ultimately found not liable to the insured and is based on the possibility for coverage, even if remote, determined at the time suit is filed." Burlington Ins. Co., 383 F.3d at 944; see also First Ins. Co., 665 P.2d at 653. "'Furthermore, where a suit raises a potential for indemnification liability of the insurer to the insured, the insurer has a duty to accept the defense of the entire suit even though other claims of the complaint fall outside the policy's coverage.'" Burlington Ins. Co., 383 F.3d at 944 (quoting Hawaiian Holiday Macadamia Nut Co. v. Indus. Indem. Co., 872 P.2d 230, 233 (Haw. 1994)). Hawaii adheres to the "complaint allegation rule."

Burlington Ins. Co., 383 F.3d at 944. Therefore, the duty to defend is limited to situations where the underlying pleadings have alleged a claim for relief which falls within the terms for coverage of the insurance contract. See id. In determining whether coverage exists, "Hawaii courts do not look merely at the label that a litigant places on his claim, but at the underlying facts alleged in the pleadings." State Farm Fir and Cas. Co. v. Metropolitan Mgmt., Civ. No. 07-00176 HG-KSC, 2007 WL 4157148, at *8 (D. Haw. Nov. 23, 2007) (citing Bayudan v. Tradewind Ins. Co., 87 Haw. 379, 387, 957 P.2d 1061, 1069 (Haw. App. 1998)). "'Where pleadings fail to allege any basis for recovery within the coverage clause, the insurer has no obligation to defend.'" Id. (quoting Hawaiian Holiday, 872 P.2d at 233) (emphasis added). Yet "where the complaint in the underlying lawsuit alleges facts within coverage," an insurer that wishes to avoid providing a defense has a high burden. Dairy Rd. Partners v. Island Ins. Co., 992 P.2d 93, 117 (Haw. 2000).

The insurer may rely on extrinsic facts to deny a defense, but only "by showing that none of the facts upon which it relies might be resolved differently in the underlying lawsuit." Id.; see also Allan D. Windt, 1 Insurance Claims & Disputes: Representation of Insurance Companies & Insureds § 4:4 (5th ed. 2011) (stating that "[i]nsurers, as a general rule, are not allowed to refuse to defend on the grounds that they are in possession of information establishing that the allegations in the complaint giving rise to coverage are untrue" and noting four common exceptions to that rule).

Furthermore, the Hawaii Supreme Court has cautioned that "courts should carefully examine the allegations of a complaint to ensure that the plaintiffs are not, through artful pleading, bootstrapping themselves to obtain insurance coverage by purporting to assert claims of negligence based on facts that reflect intentional, rather than negligent conduct." Estate of Rogers v. Amer. Reliable Ins. Co., Civ. No. 10-00482 SOM-RLP, 2011 WL 2693355, at *5 (D. Haw. July 8, 2011) (citing Dairy Road Partners, 92 Haw. at 417, 992 P.2d at 112; Group Builders, Inc. v. Admiral Ins. Co., 123 Haw. 142, 147, 231 P.3d 67, 72 (Haw. App. 2010)).

To obtain summary judgment that it has no duty to defend, an insurer has the burden of proving that there is "no genuine issue of material fact with respect to whether a possibility exist[s]" that the insured will incur liability for a claim covered by the policy. Dairy Rd. Partners, 992 P.2d at 107. In other words, Allstate must prove that it would be impossible for Kim in the ...

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