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Association of Apartment Owners of Moorings, Inc. v. Dongbu Insurance Co., Ltd.

United States District Court, D. Hawaii

August 18, 2016

ASSOCIATION OF APARTMENT OWNERS OF THE MOORINGS, INC., Plaintiff,
v.
DONGBU INSURANCE CO., LTD., Defendant.

          ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

          Barry M. Kurren United Stales Magistrate Judge.

         Before the Court are Cross Motions for Summary Judgment filed by Plaintiff Association of Apartment Owners of the Moorings, Inc. (“the AOAO”) (Doc. 15) and Defendant Dongbu Insurance Co., Ltd. (“Dongbu”) (Doc. 17). The Court heard these Motions on July 27, 2016. After careful consideration of the Motions, the supporting and opposing memoranda, and the arguments of counsel, the Court GRANTS summary judgment in favor of the AOAO and against Dongbu.

         BACKGROUND

         In 2010, Dongbu issued an insurance policy to the AOAO as the named insured. (Defendant Ex. A.) This Policy was renewed annually thereafter with substantially identical commercial general liability (“CGL”) terms through June 30, 2015. (Robert Raben Decl’n ¶ 7; Defendant’s Exs. A-E.) Pursuant to the Policy’s CGL Coverage Form, Dongbu agreed to provide insurance coverage as follows: “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” (Policy at CGL Coverage Form.) “Bodily injury” and “property damage” are defined in the Policy, but “damages” is not. (Id.)

         On April 7, 2014, while the Policy was in effect, Jo-Anne and Brent Braden (“the Bradens”), owners of a residential unit at the Moorings, filed a demand for arbitration against the AOAO. (Raben Decl’n ¶ 5; Arb. Award at 2.) Their principal claim was that the AOAO had failed to repair and maintain their lanai roof, which caused water damage to the interior of their unit. (Arb. Award at 2-4.) They also asserted claims for breach of the AOAO’s governing documents and tortious infliction of emotional distress. (Id. at 2.)

         On December 16, 2014, the arbitrator issued his decision. The arbitrator found that (1) the Bradens’ lanai roof is a common element that the AOAO must maintain, (2) the AOAO failed to properly maintain the Bradens’ lanai roof, which was the source of leaks that caused damage to their unit, and (3) the AOAO’s failure to address the Bradens’ interior damage was “deliberately discriminatory . . . because interior damages were paid to other owners.” (Arb. Award at 4-5.) The arbitrator awarded the Bradens $6, 203.49 in special damages, which reflected the amount they had paid to repair their roof and interior damage. (Id. at 4.) The arbitrator also required the AOAO to contract with a licensed roofing contractor to perform all necessary and reasonable work on the Bradens’ lanai roof. (Id. at 6.) The arbitrator denied the Bradens’ tort claims, but concluded they were the prevailing parties and awarded them $85, 644.30 in attorneys’ fees and $8, 515.91 in costs.[1] (Id. at 8.)

         On April 6, 2015, Dongbu notified the AOAO that, pursuant to the Policy, it would reimburse the AOAO $6, 203.49 in special damages and $8, 515.91 in costs, but would not pay the attorneys’ fees award of $85, 644.30. (Plaintiff’s Ex. D.) Dongbu explained that “the award of attorney’s fees is not covered under the relevant insurance policy because, simply put, attorney’s fees do not constitute ‘bodily injury, ’ ‘property damage, ’ or ‘personal and advertising injury’ as those terms are defined in the policy.” (Id.)

         In light of Dongbu’s position that attorneys’ fees are not covered by the Policy, the AOAO filed the instant action, seeking a judgment in the amount of $85, 644.30 for the attorneys’ fees awarded by the arbitrator, plus prejudgment interest. Both parties filed Motions for Summary Judgment.

         STANDARD OF REVIEW

         A motion for summary judgment may not be granted unless the court determines that there is no genuine issue of material fact, and that the undisputed facts warrant judgment for the moving party as a matter of law. See Fed. R. Civ. P. 56(c). In assessing whether a genuine issue of material fact exists, courts must resolve all ambiguities and draw all factual inferences in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); see also Cline v. Indus. Maint. Eng’g & Contracting Co., 200 F.3d 1223, 1228 (9th Cir. 2000).

         In deciding a motion for summary judgment, the court’s function is not to try issues of fact, but rather, it is only to determine whether there are issues to be tried. Anderson, 477 U.S. at 249. If there is any evidence in the record from which a reasonable inference could be drawn in favor of the non-moving party on a material issue of fact, summary judgment is improper. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 (9th Cir. 1987).

         DISCUSSION

         In this diversity action, the Court must apply the substantive law of the forum state, Hawaii. Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir. 1980). Under Hawaii law, “insurance policies are subject to the general rules of contract construction; the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended.” Taylor v. Gov’t Employees Ins. Co., 978 P.2d 740, 744 (Haw. 1999) (brackets omitted). “[E]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.” Id. (brackets omitted). Additionally, “because insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer’s attorneys, [Hawaii courts] have long subscribed to the principle that they must be construed liberally in favor of the insured and any ambiguities must be resolved against the insurer.” Id. at 745 (brackets omitted). “Put another way, the rule is that policies are to be construed in accord with the reasonable expectations of a layperson.” Id.

         The Policy terms at issue in this case state that Dongbu “will pay those sums that the [AOAO] becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” (Policy at CGL Coverage Form.) It is undisputed that the AOAO became legally obligated to pay the attorneys’ fees award when the state court confirmed the award. It is also undisputed that the arbitrator found the Bradens suffered property damage due to leaks in their lanai roof. Further, it is undisputed that Dongbu reimbursed the AOAO pursuant to the Policy, for special damages and costs awarded by the arbitrator. In light of that payment, it is clear that the Policy covered the Bradens’ property damage and that the damage was “property damage to which this insurance ...


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