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United States Fire Insurance Co. v. Hawaiian Canoe Racing Associations

United States District Court, D. Hawaii

March 29, 2019

UNITED STATES FIRE INSURANCE COMPANY, A FOREIGN CORPORATION; Plaintiff,
v.
HAWAIIAN CANOE RACING ASSOCIATIONS, HAWAIIAN KAMALI'I INC., doing business as HAWAIIAN CANOE CLUB, KIHEI CANOE CLUB, MARK DAVID STEVENS, DOE SPOTTER, DOE DEFENDANTS, Defendants.

          ORDER GRANTING MOTIONS TO DISMISS AND/OR STAY AND SEVER CROSS-CLAIM AND GRANTING JOINDERS IN THE MOTION

          Leslie E. Kobayashi United States District Judge.

         On October 23, 2018, Defendant/Counterclaim Defendant/Cross-claim Defendant Hawaiian Kamali`i, Inc., doing business as Hawaiian Canoe Club (“HCC”), filed a motion to dismiss, or to stay and sever, the cross-claim filed by Defendant/Third-Party Plaintiff/Cross-claimant Mark David Stevens (“Stevens” and “Cross-claim”) on July 26, 2018 (“HCC Motion”). [Dkt. nos. 20-1 (Cross-claim), 32 (HCC Motion).] On November 13, 2018, Defendant Kihei Canoe Club (“KCC”) filed a similar motion (“KCC Motion”). [Dkt. no. 42.] Also before the Court are Defendant/Counterclaim Defendant/Cross-claim Defendant Hawaiian Canoe Racing Association's (“HCRA”) joinders of simple agreement in the HCC Motion and the KCC Motion (collectively “Joinders”), both filed on December 6, 2018. [Dkt. nos. 44, 45.] On January 25, 2019: 1) Stevens filed a memorandum in opposition addressing the HCC Motion and the KCC Motion (collectively “Motions”), as well as the Joinders; [dkt. no. 52;] 2) Third-Party Defendant Servco Pacific, Inc., doing business as Servco Pacific Insurance, filed a statement of no position as to each of the Motions; [dkt. nos. 53, 54;] and 3) Plaintiff/Counterclaim Defendant United States Fire Insurance Company (“US Fire”) filed a statement of no opposition to all of the Motions and Joinders, [dkt. no. 56]. On February 1, 2019, KCC filed a reply in support of the KCC Motion, and HCC filed a reply in support of the HCC Motion. [Dkt. nos. 58, 59.] The Motions and the Joinders came on for hearing on February 15, 2019. For the reasons set forth below, the Motions and the Joinders are granted insofar as: 1) Stevens's Cross-claim is dismissed without prejudice for failure to state a claim; 2) the proceedings on the Cross-claim are stayed pending the final resolution of the underlying state court action; and 3) the stayed proceedings are severed from the proceedings on the other claims in the instant case.

         BACKGROUND

         US Fire filed its Complaint for Declaratory Judgment (“Complaint”) on June 4, 2018, seeking a declaratory judgment that it does not have a duty to defend nor a duty to indemnify HCRA, HCC, KCC, Stevens (collectively “Defendants”), and other Doe defendants, as to claims arising from a September 17, 2016 incident in which Faith Ann Kalei-Imaizumi (“Kalei-Imaizumi”) was injured. See Complaint at ¶¶ 4, 21-24 & pgs. 31-32.

         According to the Complaint, September 17, 2016 was the date of the 2016 Pailolo Challenge Outrigger Canoe Race (“2016 Pailolo Challenge”). HCRA was a sponsor, host, or organizer of the 2016 Pailolo Challenge, as was HCC. HCC is a member of non-party Maui County Hawaiian Canoe Association (“Maui HCA”), which is part of the HCRA. Kalei-Imaizumi was a switch or relief paddler for KCC's team that was entered in the Pailolo Challenge. KCC is also a member of the Maui HCA. [Id. at ¶¶ 2-4.] Stevens was the owner and operator of the Ohana, which was an escort vessel for KCC's team in the 2016 Pailolo Challenge. [Id. at ¶¶ 5, 17.]

         On the date of the 2016 Pailolo Challenge, Kalei-Imaizumi and other members of KCC's team swam to the Ohana, which was in an off-shore staging area at the time. After the KCC team members boarded the Ohana, Stevens's hat blew into the water, and Kalei-Imaizumi re-entered the water to retrieve it. Kalei-Imaizumi was injured while she was attempting to re-board the Ohana using a ladder. [Id. at ¶¶ 21-24.] Kalei-Imaizumi alleges Stevens and others failed to warn her that the propellers near the ladders did not have guards and were extremely dangerous. [Id. at ¶ 29.] Kalei-Imaizumi, her husband, and their children (“Underlying Plaintiffs”) filed an action against Defendants and others in state court, Kalei-Imaizumi, et al. v. Stevens, et al., Civil No. 17-1-0474 (“Underlying Action”). [Id. at ¶¶ 10-11, Exh. A (complaint in the Underlying Action (“Underlying Complaint”)).] Only the Underlying Plaintiffs' claims that are relevant to the instant case will be discussed here.

         US Fire issued Marine Policy No. 830-101897-8 to HCRA, for the period from January 1, 2016 to January 1, 2017 (“Policy”). [Complaint at ¶ 41, Exh. B (Policy).] HCRA, as well as “‘[t]he Island Association, its Member Clubs and their Members and Director & Board Members'” are named insureds under the Policy. [Complaint at ¶ 41.] HCRA, HCC, and KCC (“Club Defendants”) tendered the defense of the claims against them in the Underlying Action to U.S. Fire under the Policy. U.S. Fire is defending all of the Club Defendants under a reservation of rights. [Id. at ¶ 46.]

         Stevens filed his original answer to U.S. Fire's Complaint on July 24, 2018, and an amended answer (“First Amended Answer”) on July 26, 2018. [Dkt. nos. 17, 20.] The First Amended Answer includes the Cross-claim against the Club Defendants and the Doe defendants named in the Complaint. [Dkt. no. 21-1.] Count I of the Cross-claim (“Cross Count I”) alleges the Club Defendants were negligent in failing to obtain the appropriate insurance for the 2016 Pailolo Challenge. Stevens also alleges the failure to obtain appropriate insurance was a breach of the Club Defendants' contractual duties. Further, he contends this management and operational negligence is covered under the Club Defendants' general liability insurance policies. [Cross-claim at ¶¶ 8-20.] Count II of the Cross-claim (“Cross Count II”) alleges Stevens is entitled to implied indemnification and/or equitable subrogation. [Id. at ¶¶ 21-24.]

         HCC argues the Cross-claim should be dismissed because: it fails to state a claim upon which relief can be granted; and it is duplicative of both the cross-claim that Stevens filed in Great Divide Insurance Co. v. Hawaiian Kamali`i, Inc., et al., CV 18-00140 LEK-RLP (“Great Divide” and “the Great Divide Cross-claim”), and the cross-claim that Stevens filed in the Underlying Action. In the alternative, HCC urges this Court to “[s]tay, sever, and abstain from this action” until the conclusion of the Underlying Action. [Mem. in Supp. of HCC Motion at 2.] The KCC Motion raises substantively similar arguments.

         DISCUSSION

         I. Dismissal

         A. Failure to State a Claim

         Cross Count I sounds primarily in negligence, and damages are a required element of a negligence claim. See Kennedy v. Wells Fargo Bank, CIVIL NO. CV 18-00068 DKW-KJM, 2018 WL 3624967, at *3 (D. Hawai`i July 30, 2018) (“The elements of a negligence claim under Hawaii law are: (1) duty; (2) breach of duty; (3) causation; and (4) damages.” (some citations omitted) (citing Cho v. State, 115 Hawai`i 373, 168 P.3d 17, 23 n.11 (2007))). Similarly, Cross Count II is primarily an indemnification claim, and the plaintiff's discharge of an obligation to a third-party is a required element of an indemnification claim. See Seabright Ins. Co. v. Matson Terminals, Inc., 828 F.Supp.2d 1177, 1187-88 (D. Hawai`i 2011) (“The framework for analyzing a claim for equitable indemnity requires a plaintiff to plead and prove that: (1) he or she discharged a legal obligation owed to a third party; (2) the defendant was also liable to the third party; and (3) as between the claimant and defendant, the obligation ought to be discharged by the latter.” (citation and internal quotation marks omitted)).[1]

         HCC and KCC argue that, because there has been neither a determination of liability nor an award of damages in the Underlying Action, Stevens: does not have damages to support his negligence claim; and cannot pursue an indemnification claim because he has not discharged any obligation to the Underlying Plaintiffs. In the context of the instant Motions, Stevens argues he has been forced to pay for his legal defense in the Underlying Action, and those expenses constitute damages supporting Cross Count I. Further, Stevens argues that, if the Club Defendants had obtained the appropriate insurance for the 2016 Pailolo Challenge, he would have been covered under the policy (or policies) and the insurer(s) would have been paying the legal expenses that Stevens is currently paying. Factual allegations regarding Stevens's legal expenses would be sufficient to state a plausible basis for the damages element of Stevens's negligence claim and the discharge element of his indemnification claim.[2]See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007))). Those factual allegations would also state a plausible basis for the ripeness requirement. See 18 Unnamed John Smith Prisoners v. Meese, 871 F.2d ...


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