United States District Court, D. Hawaii
DONGBU INSURANCE COMPANY, LIMITED, a foreign corporation, Plaintiff,
DAVID L. WATSON and SARAH S. WATSON, Defendant.
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT AND DENYING DEFENDANTS’ CROSS-MOTION FOR
PARTIAL SUMMARY JUDGMENT
Dongbu Insurance Company seeks a declaration that it owes no
duty to defend or indemnify its policyholders, Defendants
David and Sarah Watson, against an action pending in
Hawai‘i state court. The underlying action alleges
breach of contract and negligent misrepresentation claims
against the Watsons. Because there has been no
“occurrence” within the meaning of the relevant
policy sufficient to trigger coverage, the Court GRANTS
Dongbu’s Motion for Summary Judgment and DENIES the
Watsons’ Cross-Motion for Partial Summary Judgment.
The Underlying Action
case arises out of a lawsuit pending in the Circuit Court of
the Third Circuit, State of Hawai‘i, entitled Bodhi
Anderson, et al., v. Casey M. Cantwell, et al., Civil
No. 14-1-0453. The lawsuit followed the sale of real property
(“the Property”) by the Watsons to Bodhi and
Brittany Anderson (collectively, the “Underlying
Plaintiffs”). Dkt. No. 25-2, Ex. 1 (“Underlying
to the Underlying Complaint, the Watsons enlisted the
services of a real estate agency to sell the Property and to
have it advertised on the Multiple Listing Service
(“MLS”) at an asking price of $435, 000.00.
Id. ¶¶ 3, 12. The Property’s MLS
listing, dated March 20, 2011, allegedly contained
“misleading language” regarding the
Property’s valuation and permitting status in an
attempt “to encourage an offer higher than what the
sellers and Prudential Orchid Isle Properties [the
seller’s agent] knew the property was appraised for on
December 4, 2010.” Id. ¶ 12. The MLS
Listing described the Property as a “5 bedroom, 3
bathroom legally permitted home, ” and stated that the
“[c]urrent appraisal validating [the] asking price
[was] available to share with accepted offers.”
on the information in the MLS listing, the Underlying
Plaintiffs scheduled an appointment to view the property on
March 20, 2011. Id. ¶ 13. The following day,
after being told that another person was interested in
purchasing the property, the Underlying Plaintiffs submitted
a written offer of $400, 000. Id. ¶¶
14-15. On March 23, 2011, the Underlying Plaintiffs received
a counteroffer, which they signed. Id. ¶¶
15-18. Shortly before the agreement was executed, the
Watsons’ agent provided the Underlying Plaintiffs with
an appraisal, dated December 4, 2010, which valued the
Property at $365, 000.00, less than the MLS listing price.
Id. ¶¶ 21, 23. The Underlying Plaintiffs
allege that “[a]lthough the listing clearly stated that
the home was ‘legally permitted, ’ the appraisal
indicated that the ‘additional space in the lower level
does not appear in County records’ . . . ‘and
that no permits were found for the area.’”
Id. ¶ 24.
Underlying Plaintiffs closed escrow and took possession of
the Property on or about May 13, 2011. Id. ¶
to the issues before the Court, the Underlying Complaint
asserts a breach of contract claim (Count One) and a
negligent misrepresentation claim (Count Three) against the
Watsons. Id. ¶¶ 31-40, 45-53.
The Homeowners’ Insurance Policy
the periods alleged in the Underlying Complaint, the Watsons
were insured under a homeowner’s policy (the
“Policy”) issued by Dongbu. The Policy contains
the following relevant provisions (bold in original):
We will provide the insurance described in this policy in
return for the premium and compliance with all applicable
provisions of this policy.
A. In this policy, “you” and “your”
refer to the “named insured” shown in the
Declarations and the spouse if a resident of the same
household. “We”, “us” and
“our” refer to the Company providing this
. . .
2. “Bodily injury” means bodily harm, sickness or
disease, including required care, loss of services and death
. . .
5. “Insured” means:
a. You and residents of your household . . . .
. . .
8. “Occurrence” means an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions, which ...