Gemini Insurance Company v. Kukui'ula Development Company (Hawaii), LLC.

Filing 477

ORDER REGARDING ISSUES ON REMAND FROM THE NINTH CIRCUIT re 469 USCA Order re 470 USCA Mandate. Signed by JUDGE LESLIE E. KOBAYASHI on 10/09/2015. -- This Court DENIES Indian Harbor's request for prej udgment interest and FINDS that the issue of the self insured retention is MOOT. There being no remaining issues on remand, this Court DIRECTS the Clerk's Office to close the case and issue an amended judgment on October 29, 2015, unless a motio n for reconsideration of this order is filed by October 26, 2015. (eps)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
GEMINI INSURANCE COMPANY,
Plaintiff,
vs.
KUKUI`ULA DEVELOPMENT COMPANY
(HAWAII), LLC; DMB KUKUI`ULA,
LLC; KDC, LLC; DMB ASSOCIATES
(HAWAII), INC; AND A & B
PROPERTIES, INC.,
Defendants.
_____________________________

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CIVIL 10-00637 LEK-BMK

ORDER REGARDING ISSUES ON REMAND FROM THE NINTH CIRCUIT
Before the Court is a matter remanded from the Ninth
Circuit Court of Appeals to “determine whether the primary policy
and the self-insured retention were exhausted and order
contribution and reimbursement accordingly.”

[Memorandum, filed

6/23/15 (dkt. no. 469) (“Remand Memorandum”), at 3.]

The Court

finds this matter suitable for disposition without a hearing
pursuant to Rule LR7.2(d) of the Local Rules of Practice of the
United States District Court for the District of Hawai`i (“Local
Rules”).

The hearing scheduled for October 13, 2015 at 9:45 a.m.

is HEREBY VACATED.

After careful review of the Remand

Memorandum, the briefs submitted by the parties, the record in
this case, and the relevant legal authority, the Court hereby
ORDERS Gemini Insurance Company (“Gemini”) to reimburse Indian
Harbor Insurance Company (“Indian Harbor”) $262,500 and DENIES

Indian Harbor’s request for prejudgment interest.
BACKGROUND
The present dispute arises from Kukui`ula Development
Corporation’s (“KDC”) Kukui`ula Residential Community Project on
the island of Kaua`i.

Nearby residents alleged that the project

caused bodily injury and property damage.

The relevant

procedural and factual background, as well as the relevant
language from the insurance policies, are set forth in this
Court’s June 29, 2012 order, [dkt. no. 274,] and February 29,
2012 order, 855 F. Supp. 2d 1125.

The Court does not find it

necessary to repeat this background information here, and will
only highlight the issues that are relevant to the instant
matter.
On July 15, 2013, the Clerk’s Office entered judgment
in favor of Gemini and against Indian Harbor pursuant this
Court’s summary judgment orders.

[Dkt. no. 442.]

On August 9,

2013, pursuant to a stipulation filed by the parties, [dkt. no.
456,] this Court entered Final Judgment in favor of Gemini and
against Indian Harbor on their respective counterclaims [Dkt. no.
457].

Indian Harbor filed its Notice of Appeal on August 13,

2013.

[Dkt. no. 459.]

In the Remand Memorandum, the Ninth

Circuit held that Indian Harbor was “not obligated to pay defense
costs until Gemini’s coverage was exhausted.”
3.]

[Remand Mem. at

The Ninth Circuit issued the Mandate on July 16, 2015, and,

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on July 21, 2015, this Court directed the parties to submit
simultaneous briefs addressing the issues articulated by the
Ninth Circuit.

[Dkt. nos. 470, 471.]

The parties’ briefs were

filed on September 8, 2015, and each party filed a response on
September 22, 2015.

[Dkt. nos. 472-73, 474-75.]
DISCUSSION

I.

Exhaustion of the Primary Policy
New York law applies to the Indian Harbor insurance

policy.

See Remand Mem. at 2 n.1 (finding that the New York

choice-of-law provision in the Indian Harbor insurance policy is
valid).

Where one insurance policy is excess to a separate

policy, the excess policy provider is required to contribute only
after the primary policy is exhausted.

Gen. Accident Fire & Life

Assurance Corp. v. Piazza, 152 N.E.2d 236, 241 (N.Y. 1958) (an
excess policy is required to contribute “only after the limits of
the [primary] policy are consumed”).
The parties agree that Gemini’s policy was not
exhausted.

[Gemini’s Memorandum Regarding Exhaustion of Primary

Policy and Self-Insured Retention, filed 9/8/15 (dkt. no. 472)
(“Gemini Remand Brief”), at 5 (“Gemini agrees its $2,000,000
policy limit was not exhausted.”); Indian Harbor’s Brief Re:
Issues on Remand, filed 9/8/2015 (dkt. no. 473) (“Indian Harbor
Remand Brief”), at 1 (“Gemini does not dispute that the selfinsured retention of its policy was exhausted but that its policy
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is not.”).]

The parties further agree that Gemini owes Indian

Harbor $262,500.

[Gemini Remand Brief at 5 (“The determination

that Indian Harbor’s policy was excess to Gemini’s entitles
Indian Harbor to reimbursement for that amount of the settlement
paid by Indian Harbor in the Schredder1 action in the amount of
$262,500.

Gemini has already notified Indian harbor that Gemini

stands ready to pay that amount.”); Indian Harbor Remand Brief at
1 (“Gemini owes Indian Harbor the $262,500 for the Schredder
settlement”).]

This Court agrees, and ORDERS Gemini to pay

Indian Harbor $262,500.
II.

Self-Insured Retention
There appears to be some confusion among the parties

about the Ninth Circuit’s instruction to this Court to determine
whether the self-insured retention was exhausted.

Gemini states

that “the Ninth Circuit was aware that the Indian Harbor policy
contained a self-insured retention and arguments as to whether
that self-insured retention had been exhausted had been an
alternative argument raised by Indian Harbor.”
Brief at 5.]

[Gemini Remand

Gemini explains that, because its insurance policy

was not exhausted, “whether or not the Indian Harbor self-insured
retention was exhausted is admittedly moot and no longer relevant

1

Schredder v. Kukui`ula Dev. Co. (Hawaii), Civ. No. 09-10045, Circuit Court of the Fifth Circuit, State of Hawai`i, is
one of three lawsuits filed against KDC in 2009 for bodily injury
and property damage, insurance coverage for which gave rise to
the instant matter.
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to the contribution and reimbursement issue.”

[Id.]

Indian

Harbor references Gemini’s self-insured retention, and explains
that, “Gemini does not dispute that its self-insured retention
was satisfied and that its primary policy has not been exhausted,
and it therefore had the obligation to pay and has sufficient
limits to pay the $262,500.”
(footnote omitted).]

[Indian Harbor Remand Brief at 3-4

Thus, both parties agree that any issue

surrounding a self-insured retention is irrelevant, given that
Gemini’s policy was not exhausted, and the policy limit will not
be reached even after Gemini reimburses Indian Harbor for the
Schredder settlement.

This Court FINDS that the issue of whether

or not the self-insured retention was exhausted is MOOT.
III. Prejudgment Interest
The parties have both argued that Hawai`i law applies
to the determination of whether or not to award prejudgment
interest.

[Gemini Remand Brief at 3-10 (discussing cases that

apply Hawai`i law to awards of prejudgment interest); Indian
Harbor Remand Brief at 4 (“Hawaii law applies to the issue of
prejudgment interest in this diversity case.” (citation
omitted)).]

The award of prejudgment interest is governed by

Hawai`i Revised Statute § 636-16, which states:
In awarding interest in civil cases, the judge is
authorized to designate the commencement date to
conform with the circumstances of each case,
provided that the earliest commencement date in
cases arising in tort, may be the date when the
injury first occurred and in cases arising by
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breach of contract, it may be the date when the
breach first occurred.
In Tri-S Corp. v. Western World Insurance Co., the Hawai`i
Supreme Court clarified whether or not a court must find a party
at fault for undue delay in order to award prejudgment interest:
(1) if fault is found on the part of the party
seeking interest, denial of interest will not be
considered an abuse of discretion; (2) if fault is
found on the part of the party opposing interest,
an award of interest will not be considered an
abuse of discretion; and (3) where no fault is
found on either side, the trial court may still
award or deny prejudgment interest in its
discretion, depending on the circumstances of the
case.
110 Hawai`i 473, 498, 135 P.3d 82, 107 (2006); see also Weite v.
Momohara, 124 Hawai`i 236, 266, 240 P.3d 899, 929 (Ct. App. 2010)
(“There is no evidence in the record on appeal to suggest that
Momohara’s conduct unduly delayed the proceedings of the case so
as to justify an award of prejudgment interest to Weite.

The

circuit court did not abuse its discretion by denying Weite’s
motion for prejudgment interest.” (citation omitted)).
Indian Harbor argues that the Court should award
prejudgment interest because:

(1) Gemini previously requested

and was awarded prejudgment interest; (2) Indian Harbor did not
cause any delay in resolving this issue; and (3) Gemini filed the
instant case against KDC, which brought Indian Harbor into the
lawsuit, and “Gemini ultimately was found to be incorrect in all
its positions.”

[Indian Harbor Remand Brief at 7-9.]

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Further,

Indian Harbor contends that it “several times argued that it had
no duties under its policy because it was excess to Gemini’s
primary policy.

Each time, Gemini argued against the position

and persuaded the Court to rule against Indian Harbor.”
9.]

[Id. at

While Indian Harbor claims that this caused “significant

delay” in the ultimate determination that its position was
correct, [id.,] Indian Harbor does not claim that Gemini engaged
in any dilatory tactics.

This was a complex, multi-party

dispute, and any delay was the result of the normal course of
litigation and was not the fault of either party in the instant
matter.

This Court therefore FINDS that an award of prejudgment

interest is not appropriate,2 and DENIES Indian Harbor’s request
for prejudgment interest.
CONCLUSION
On the basis of the foregoing, this Court FINDS that
Gemini owes Indian Harbor $262,500.

This Court ORDERS Gemini to

pay this amount to Indian Harbor, though Indian Harbor’s counsel,

2

Indian Harbor argues that “Gemini cannot reasonably
dispute the appropriateness of interest here, when it previously
requested and was awarded interest.” [Indian Harbor Remand Brief
at 7.] It is true that Gemini requested and was awarded
prejudgment interest. [Motion for Prejudgment Interest and
Postjudgment Interest (“Motion”), filed 7/12/13 (dkt. no. 440);
Order granting Motion, filed 7/25/13 (dkt no. 450).] It is worth
noting, however, that Indian Harbor did not oppose Gemini’s
Motion. [Indian Harbor Insurance Company’s Statement of No
Opposition to Gemini Insurance Company’s Motion for Prejudgment
Interest and Postjudgment Interest, filed 7/17/13 (dkt. no.
445).] This Court’s ruling on the Motion does not control the
outcome of the issue currently before it.
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by November 24, 2015.
In addition, this Court DENIES Indian Harbor’s request
for prejudgment interest and FINDS that the issue of the selfinsured retention is MOOT.

There being no remaining issues on

remand, this Court DIRECTS the Clerk’s Office to close the case
and issue an amended judgment on October 29, 2015, unless a
motion for reconsideration of this order is filed by October 26,
2015.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, October 9, 2015.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

GEMINI INSURANCE COMPANY VS. KUKUI`ULA DEVELOPMENT COMPANY, ET
AL; CIVIL 10-00637 LEK-BMK; ORDER REGARDING ISSUES ON REMAND FROM
THE NINTH CIRCUIT

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