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Dongbu Insurance Co., Ltd. v. Watson

United States District Court, D. Hawaii

July 27, 2016

DONGBU INSURANCE COMPANY, LIMITED, a foreign corporation, Plaintiff,
v.
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

         Plaintiff 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.

         BACKGROUND

         I. Factual Background

         A. The Underlying Action

         This 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 Complaint.”).

         According 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.” Id.

         Based 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.

         The Underlying Plaintiffs closed escrow and took possession of the Property on or about May 13, 2011. Id. ¶ 36.

         Relevant 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.[1] Id. ¶¶ 31-40, 45-53.

         B. The Homeowners’ Insurance Policy

         During 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):

AGREEMENT
We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy.
DEFINITIONS
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 insurance.
. . .
2. “Bodily injury” means bodily harm, sickness or disease, including required care, loss of services and death that results.
. . .
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 ...

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