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

United States District Court, D. Hawaii

April 17, 2019



          Leslie E. Kobayashi, United States District Judge.

         On September 28, 2018, Third-Party Defendant Servco Pacific, Inc., doing business as Servco Pacific Insurance (“Servco”), filed its Motion to Dismiss Defendant/Third-Party Plaintiff Mark David Stevens' Third-Party Complaint [Dkt. 20-2] for Failure to State a Claim (“Motion”). [Dkt. no. 30.] On December 6, 2018, Defendant/Counterclaim Defendant/Cross-claim Defendant Hawaiian Canoe Racing Association (“HCRA”) filed a statement of no position. [Dkt. no. 46.] Defendant/Third-Party Plaintiff/Cross-claimant Mark David Stevens (“Stevens”) filed his memorandum in opposition on February 1, 2019, and Servco its reply on February 8, 2019. [Dkt. nos. 57, 62.] This matter came on for hearing on February 22, 2019. On March 14, 2019, this Court issued an entering order ruling on the Motion. [Dkt. no. 73.] The instant Order supersedes that entering order. Servco's Motion is hereby granted, and the Third-Party Complaint is hereby dismissed with prejudice, for the reasons set forth below.


         The relevant background of this case is described in this Court's Order Granting Motions to Dismiss and/or Stay and Sever Cross-Claim and Granting Joinders in the Motion, filed on March 29, 2019 (“3/29/19 Order”). [Dkt. no. 85.[1] Only the background that is relevant to the instant Motion will be repeated here.

         Plaintiff/Counterclaim Defendant United States Fire Insurance Company (“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; Stevens; Defendant/Counterclaim Defendant/Cross-claim Defendant Hawaiian Kamali`i, Inc., doing business as Hawaiian Canoe Club (“HCC”); Defendant/Counterclaim Defendant/Cross-claim Defendant Kihei Canoe Club (“KCC” and 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 during the 2016 Pailolo Challenge Outrigger Canoe Race (“2016 Pailolo Challenge”). See Complaint at ¶¶ 4, 21-24 & pgs. 31-32. 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”)).]

         Stevens notes that Counts VIII and IX of the Underlying Complaint allege HCRA, HCC, and KCC (collectively “Club Defendants”) were negligent in their management of the 2016 Pailolo Challenge because they, inter alia, failed to obtain insurance coverage appropriate for the race. [Stevens's First Amended Answer to Complaint for Declaratory Judgment, Filed on June 4, 2018 (“First Amended Answer”), filed 7/26/18 (dkt. no. 20), Third-Party Complaint Against Servco Pacific, Inc., dba Servco Pacific Insurance (“Third-Party Complaint”) at ¶ 4.] Stevens asserts the appropriate insurance policy (or policies) for the Club Defendants' management of the 2016 Pailolo Challenge would have covered: the Club Defendants; the Club Defendants' “employees, agents and servants, ” including Stevens; participants in the 2016 Pailolo Challenge; and “anyone who might be injured by participating in the canoe race for the contemplated activities in the” 2016 Pailolo Challenge. [Id.] Stevens contends that, had the Club Defendants obtained the appropriate insurance for the 2016 Pailolo Challenge, the Underlying Plaintiffs' injuries would have been covered. [Id.] Stevens also argues that, “[b]ased on their experience and earlier races, ” the Club Defendants - in particular, HCRA - were aware that, in order to obtain a permit to conduct the 2016 Pailolo Challenge, “they had to obtain insurance covering the State of Hawaii, the canoe clubs, boat captains, etc., . . . for the fiscal protection of the [Club] Defendants and other canoe clubs, boat captains and others involved in the race, and the protection of participants (paddlers and those helping with the race).” [Id. at ¶ 5.] Stevens alleges that: when HCRA obtained insurance for the 2016 Pailolo Challenge, HCRA was acting as an agent for the Club Defendants; HCRA's procurement of the insurance it obtained was negligent because it did not provide coverage for risks that could be reasonably anticipated; and HCRA was negligent in failing to obtain other insurance policies that would have covered reasonably anticipated risks, including those alleged in the Underlying Complaint. Stevens asserts the policy at issue in the Complaint (“Policy”) should provide coverage for HCRA's negligence regarding insurance procurement.[2] [Id. at ¶¶ 6-7.]

         In particular, Stevens alleges HCRA, its insurer, and its insurance broker were named as third-party defendants in Zbin v. State, Civil No. 12-1-000510 (State of Hawai`i, Second Circuit Court), because they failed to obtain the proper insurance for another event. [Id. at ¶ 8.] Therefore, Stevens argues “HCRA knew that issues regarding proper insurance, coverage and exclusions could arise in a canoe racing event.” [Id.] In light of the past litigation, Stevens alleges HCRA “likely had conversations with representatives of the State of Hawaii and its insurance broker regarding what insurance coverage was appropriate.” [Id. at ¶ 9.] Further, HCRA either did the same with its member canoe clubs (including HCC and KCC) prior to the 2016 Pailolo Challenge or, if it failed to do so, HCRA was negligent in failing to so advise its members. [Id. at ¶¶ 9-10.] Stevens contends that, if HCRA's handling of the 2016 Pailolo Challenge's insurance issues was negligent, HCC and KCC were also negligent because HCRA was acting on their behalf. Further, Stevens alleges the Club Defendants' negligence is covered under the Policy, or would have been covered by other appropriate insurance policies. [Id. at ¶¶ 12-13.] Stevens asserts the Club Defendants' failure to obtain the appropriate insurance was “negligence, fault, breach of duty to Defendant Stevens (and others), and breach of contract regarding their management of the race (of which Defendant Stevens was a third-party beneficiary).” [Id. at ¶ 17.]

         According to the Third-Party Complaint, Servco was HCRA's insurance broker for the Policy, and therefore Servco “had a legally recognized duty to procure the appropriate insurance for the reasonably foreseeable scope of injuries that could be suffered during an open ocean canoe race, and the participants in that activity.” [Id. at ¶ 14 (citation omitted).] Stevens alleges Servco was negligent in: 1) failing to diligently determine the necessary insurance for the foreseeable risks and injuries of the 2016 Pailolo Challenge; 2) failing to provide the Club Defendants with reasonable advice regarding the necessary insurance; and 3) procuring insurance that was not appropriate for the event (including procuring insurance that does not cover the injuries at issue in the Underlying Action). [Id. at ¶ 15.] Stevens asserts he would have been a third-party beneficiary of the appropriate insurance that Servco should have obtained for HCRA. Thus, he asserts Servco has independent liability to him. [Id.] He argues he “is entitled to judgment against Third-Party Defendant Servco for the costs of his defense and any damages that might be assessed against him in the Underlying [Action].” [Id. at ¶ 19.]

         Servco seeks dismissal, with prejudice, of the Third-Party Complaint because: 1) an insurance agent does not owe duties to third parties who may have benefited if the insured purchased a different policy; 2) even if such duties exist, there are insufficient factual allegations to support Stevens's argument that he was a third-party beneficiary; and 3) regardless of its merits, the Third-Party Complaint is improper because it does not seek contribution or indemnity from Servco for liability Stevens may have to U.S. Fire.


         I. Duties of an Insurance Agent This district court has stated:

In Hawai`i . . ., “[a]n insurance agent owes a duty to the insured to exercise reasonable care, skill and diligence in carrying out the agent's duties in procuring insurance.” Quality Furniture, Inc. v. Hay, 61 Haw. 89, 93, 595 P.2d 1066, 1068 (1979). Such a duty is owed to “the extent of the responsibilities that the agent had in rendering help and providing advice to the insured.” Macabio [v. TIG Ins. Co.], 87 Hawai`i [307, ] 318, 955 P.2d [100, ] 111 [(1998)] (quoting Quality Furniture, 61 Haw. at 93, 595 P.2d at 1068) (internal quotation marks and brackets omitted).

Certain Underwriters at Lloyd's London Subscribing to Policy No. LL001HI0300520 v. Vreeken, No. 30156, 2014 WL 2949463, at *3 (Hawai`i Ct. App. June 30, 2014) (some alterations in Certain Underwriters) (emphasis added). Macabio addressed whether the insurance agent had a duty to inform the insured about the recent enactment of a statute that required insurers to offer the option of stacking uninsured and underinsured motorist coverage. 87 Hawai`i at 317-19, 955 P.2d at 110-12. The Hawai`i Supreme Court stated, “when looking at the facts of each case to determine the duty of an insurance agent, the nature of the relationship between the agent and the insured must be scrutinized.” Id. at 319, 955 P.2d at 112 (emphasis added). Quality Furniture also involved a dispute between the insured and its insurance agents. The supreme court held that the agents' failure to procure insurance when the insured leased another warehouse was not negligent under the circumstances of that case, including what the insurer had knowledge of and what the insured did or failed to do. Quality Furniture, 61 Haw. at 93, 595 P.2d at 1069.

         Even assuming that all of the factual allegations of the Third-Party Complaint are true, [3] Stevens is not the insured who obtained the Policy through Servco and there is no direct relationship between Servco and Stevens. Stevens's position is that Servco owed him a duty of care, even in the absence of a direct relationship, because he “would have been a third-party beneficiary of ...

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