United States District Court, D. Hawaii
ORDER GRANTING PLAINTIFF STATE FARM FIRE AND CASUALTY
COMPANY'S MOTION FOR SUMMARY JUDGMENT AGAINST ALL
Kenneth J. Mansfield United States Magistrate Judge
State Farm Fire and Casualty Company (“State
Farm”) filed its Motion for Summary Judgment Against
All Defendants on December 27, 2017 (“Motion”).
See ECF No. 30. Defendant Certified Management,
Inc., dba Associa Hawaii (“Associa”) filed its
Memorandum in Opposition to the Motion on February 22, 2018
(“Opposition”). See ECF No. 37.
Defendant Regency at Poipu Kai (“Regency”) filed
a Joinder to Associa's Opposition on February 23, 2018
(“Joinder”). See ECF No. 39. Plaintiff
filed its Reply on March 1, 2018. ECF No. 40.
Court held a hearing on the Motion on March 15, 2018. Ashley
R. Shibuya, Esq., appeared on behalf of State Farm. Wesley
H.H. Ching, Esq., appeared on behalf of Associa, and John D.
Marshall, Esq., appeared on behalf of Regency. After
carefully considering the memoranda, arguments, and the
record in this case, the Court GRANTS the Motion.
is a condominium association for a condominium located on
Kaua'i. ECF No. 33 at ¶ 4. At all relevant times,
Associa served as the managing agent for Regency, pursuant to
a Fiscal & Administrative Property Management Agreement
for Regency AOAO (“Management Agreement”).
Id. at ¶ 13.
declaratory action arises out of a lawsuit filed by Frederick
T. Caven, Jr. (“Caven”), on behalf of himself and
a class of similarly situated persons, against Associa in the
Circuit Court of the First Circuit, State of Hawai'i
(“Underlying Lawsuit”). State Farm asks this Court
to find that, under the terms of an insurance policy issued
by State Farm to Regency, State Farm has no duty to defend or
indemnify Regency and Associa with respect to the Underlying
Lawsuit. The facts of this case are generally
Underlying Lawsuit, Caven alleges that he was a previous
co-owner of a condominium unit located on Kaua'i
(“Unit”). ECF No. 33-3 at ¶ 31. “As an
owner of the [Unit], [Caven] was required to be a member of
two homeowners associations: Poipu Kai Association, and
[Regency]” (collectively, “Associations”).
Id. at ¶ 32. Caven alleges that Associa was the
managing agent for both Associations. Id. at ¶
alleges that he sold the Unit in or around April 2016.
Id. at ¶ 34. In connection with the sale of the
Unit, Caven had to provide the purchaser with condominium
documents for both Associations, which Caven's real
estate agent requested from Associa. Id. at
¶¶ 35-36. Associa provided Caven with a “link
to an internet site where [Caven] could download the
requested documents.” Id. at ¶ 37.
Associa charged Caven a fee of $182.29 to download 197 pages
of condominium documents for Regency. Id. at ¶
38. In addition, Associa charged Caven $286.46 for a one-page
“fee status confirmation, ” “a document
prepared by [Associa] which contains financial and other
information sufficiently detailed to comply with requests for
information and disclosures related to the resale of [the
Unit].” Id. at ¶ 40.
alleges that the fees Associa charged Caven and other unit
owners for the condominium documents were excessive and in
violation of Hawai'i law. Caven asserts the following
clams against the Associa in the Underlying Lawsuit: (1)
Count I - Violations of Haw. Rev. Stat. Chapter 514B; (2)
Count II - Violations of Haw. Rev. Stat. Chapter 421J; and
(3) Count III - Violations of Haw. Rev. Stat. Chapter 480.
See ECF No. 33-3 at 13-16. Regency is not a party in
the Underlying Lawsuit.
State Farm's Insurance Policy to Regency
is the named insured on a residential community association
policy issued by State Farm to Regency, Policy No.
91-BN-8879-2 (“Policy”). ECF No. 33 at ¶ 15.
The coverage period for the Policy was from December 15,
2015, to December 15, 2016. Id.
initiated the Underlying Lawsuit on September 20, 2016. ECF
No. 33 at ¶ 1. Associa asserts that, on or around
October 3, 2016, Associa tendered its request for defense and
indemnification of the claims in the Underlying Lawsuit to
Regency pursuant to a defense and indemnity provision in the
Management Agreement. ECF No. 36 at ¶ 24. Regency's
board of directors subsequently submitted Associa's
tender to State Farm for coverage under the Policy.
Id. at ¶ 25. On October 27, 2016, State Farm
informed Associa via e-mail that it would defend Associa in
the Underlying Suit. See Id. at ¶ 26; see
also ECF No. 33 at ¶ 17.
parties dispute whether State Farm's agreement to defend
Associa in the Underlying Lawsuit was subject to a full
reservation of rights by State Farm. Associa contends that it
never received a reservation of rights from State Farm. ECF
No. 36 at ¶ 28. State Farm, however, contends that it
sent a letter to Associa, dated December 2, 2016, setting
forth its reservation of rights as to its defense of Associa
in the Underlying Lawsuit (“Reservation Letter”).
ECF No. 41-3.
The Present Lawsuit
Farm filed its Complaint in this case on February 8, 2017.
ECF No. 1. State Farm filed its First Amended Complaint on
October 2, 2017. ECF No. 24. Associa filed its Counterclaim
for Declaratory Judgment (“Counterclaim”) against
State Farm on October 12, 2017. ECF No. 27-1. In the
Counterclaim, Associa seeks a declaratory judgment stating
that, pursuant to the Policy, State Farm has a duty to defend
and a duty to indemnify Associa in the Underlying Lawsuit,
among other things. See Id. at 6.
Farm filed the instant Motion on December 27, 2017, seeking
summary judgment as to its First Amended Complaint and
judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). Accordingly, this Court
shall grant summary judgment if “the pleadings, the
discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as
a matter of law.” Fed.R.Civ.P. 56(c).
moving party has both the initial burden of production and
the ultimate burden of persuasion on a motion for summary
judgment. Nissan Fire & Marine Ins. Co. v. Fritz
Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). The moving
party must identify for the court “those portions of
the materials on file that it believes demonstrate the
absence of any genuine issue of material fact.”
T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors
Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
“A fact is material if it could affect the outcome of
the suit under the governing substantive law.”
Miller v. Glenn Miller Prods., Inc., 454 F.3d 975,
987 (9th Cir. 2006).
moving party meets its initial burden on a summary judgment
motion, the “burden then shifts to the nonmoving party
to establish, beyond the pleadings, that there is a genuine
issue for trial.” Id. The nonmoving party may
not rely on the mere allegations in the pleadings and instead
“must set forth specific facts showing that there is a
genuine issue for trial.” Porter v. Cal. Dep't
of Corr., 419 F.3d 885, 891 (9th Cir. 2005) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986)). This means that the nonmoving party “must do
more than simply show that there is some metaphysical doubt
as to the material facts.” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)
(footnote omitted). “A genuine dispute arises if the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” California v.
Campbell, 319 F.3d 1161, 1166 (9th Cir. 2003);
Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th
Cir. 2000) (“There must be enough doubt for a
‘reasonable trier of fact' to find for plaintiffs
in order to defeat the summary judgment motion.”).
Court has diversity jurisdiction over this case pursuant to
28 U.S.C. § 1332. Accordingly, this Court must apply
Hawai‘i state law to determine whether State Farm has a
duty to defend and a duty to indemnify Regency and Associa
under the Policy. See Gasperini v. Ctr. for Humanities,
Inc., 518 U.S. 415, 427 (1996) (“Under the Erie
doctrine, federal courts sitting in diversity apply state
substantive law and federal procedural law.”); Ill.
Nat'l Ins. Co. v. Nordic PCL Constr., Inc., 870
F.Supp.2d 1015, 1028 (D. Haw. 2012) (applying state law to
determine whether alleged construction defects were caused by
“occurrence” as defined by the language in the
insurance policy at issue). “When interpreting state
law, a federal court is bound by the decisions of a
state's highest court.” Progressive Cas. Ins.
Co. v. Ferguson, 134 F.Supp.2d 1159, 1162 (D. Haw. 2001)
(citing Ariz. Elec. Power Coop., Inc. v. Berkeley,
59 F.3d 988, 991 (9th Cir. 1995)). “In the absence of
such a decision, a federal court must predict how the highest
state court would decide the issue using intermediate
appellate court decisions, decisions from other
jurisdictions, statutes, treatises, and restatements as
guidance.” In re Kirkland, 915 F.2d 1236, 1239
(9th Cir. 1990) (citation omitted).
Hawai'i Insurance Coverage Law
insurer has a duty to indemnify its insured “for any
loss or injury which comes within the coverage provisions of
the policy, provided it is not removed from coverage by a
policy exclusion.” Dairy Rd. Partners v. Island
Ins. Co., 92 Haw. 398, 413, 992 P.2d 93, 108 (Haw.
2000). The Hawai'i Supreme Court has previously
recognized that “[t]he obligation of an insurer to
defend an insured is distinct from the duty to provide
coverage.” Hart v. Ticor Title Ins. Co., 126
Haw. 448, 458, 272 P.3d 1215, 1225 (2012) (citing
Pancakes of Haw., Inc. v. Pomare Prop. Corp., 85
Haw. 286, 291, 944 P.2d 83, 88 (1997)). “Indeed, an
insurer's duty to defend is ‘broader than the duty
to pay claims and arises wherever there is a mere
potential for coverage[ ]' under a
policy.” Id. (quoting Diary Road
Partners, 92 Haw. at 412, 992 P.2d at 107. “All
doubts as to whether a duty to defend exists are resolved
against the insurer and in favor of the insured.”
Id. (citations omitted).
abides by the ‘complaint allegation rule, ' whereby
the determination of whether an insurer has a duty to defend
focuses on the claim and facts that are alleged.”
State Farm Fire & Cas. Co. v. GP West, Inc., 190
F.Supp.3d 1003, 1014 (D. Haw. 2016) (citing Burlington
Ins. Co. v. Oceanic Design & Constr. Inc., 383 F.3d
940, 944 (9th Cir. 2004)); see also Hawaiian Holiday
Macadamia Nut Co. v. Indus. Indem. Co., 76 Haw. 166,
170, 872 P.2d 230, 234 (1994) (citations omitted) (“The
duty to defend is limited to situations where the pleadings
have alleged claims for relief which fall within the terms
for coverage of the insurance contract.”). “Where
the pleadings fail to allege any basis for recovery within
the coverage clause, the insurer has no obligation to
defend.” Hawaiian Ins. & Guar. Co. v. Blair
Ltd., 6 Haw.App. 447, 449726 P.2d 1310, 1312 (Ct. App.
1986). “Stated differently, ‘to have any effect
at all, ' the duty to defend must be determined when the
claim is initially asserted.” Hart, 126 Haw.
at 458, 272 P.3d at 1225 (quoting Pancakes of Haw.,
85 Haw. at 292, 944 P.2d at 89).
determining whether coverage exists under a liability policy,
Hawaii courts do not look at the way a litigant states a
claim, but rather at the underlying facts alleged in the
pleadings.” State Farm Fire & Cas. v.
Elsenbach, No. CV 09-00541 DAE-BMK, 2011 WL 2606005, at
*8 (D. Haw. June 30, 2011) (citing Oahu Transit Servs.,
Inc. v. Northfield Ins. Co., 107 Haw. 231, 238, 112 P.3d
717, 724 (2005); Bayudan v. Tradewind Ins. Co., 87
Haw. 379, 387, 957 P.2d 1061, 1069 (Ct. App. 1998)).
“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.” Hawaiian Holiday, 76
Haw. at 169, 872 P.2d at 233 (citations and internal
quotation marks omitted).
a motion for summary judgment regarding its duty to defend,
the insurer bears the burden of proving there is ‘no
genuine issue of material fact with respect to whether a
possibility exists that the insured would incur
liability for a claim covered by the policy.'”
GP West, Inc., 190 F.Supp.3d at 1014 (emphasis in
Tri-S Corp.) (quoting Tri-S Corp. v. W. World
Ins. Co., 110 Haw. 473, 488, 135 P.3d 82, 97 (2006)).
“The insured's burden, on the other hand, is
‘comparatively light, because it has merely to prove
that a possibility of coverage exists.'”
Id. (emphasis in Tri-S Corp.) (quoting
Tri-S Corp., 110 Haw. at 488, 135 P.3d at 97).
State Farm's First Amended Complaint Against Regency and
Whether the Policy Requires State Farm to Defend and
Indemnify Regency in the Underlying Lawsuit
Farm argues that, pursuant to the terms of the Policy, State
Farm has no duty to defend or indemnify Regency with respect
to the Underlying Lawsuit. See ECF No. 30-3 at
16-17. Neither Associa's Opposition nor Regency's
Joinder address this argument. At the hearing on the Motion,
Mr. Marshall stated on behalf of Regency that Regency does
not oppose the Motion as to this issue. The Court thus
considers State Farm's request for summary judgment
against Regency as unopposed. “When a motion for
summary judgment is unopposed, the motion should nonetheless
be granted only when the movant's papers are themselves
sufficient to support the motion, and the papers do not
reveal a genuine issue of material fact.” Martin ...