Founders Insurance Company v. Kim & Jon, Inc.
Filing
58
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF FOUNDERS INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT AND GRANTING THIRD-PARTY DEFENDANT THE BURLINGTON INSURANCE COMPANYS MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, PARTIAL SUMMAR Y JUDGMENT re 35 Motion for Summary Judgment re 27 Motion for Summary Judgment. Signed by JUDGE LESLIE E. KOBAYASHI on 02/27/2015. Founders Insurance Company's Motion for Summary Judgment, filed o n November 4, 2014 is HEREBY GRANTED IN PART AND DENIED IN PART; and The Burlington Insurance Company's Motion for Summary Judgment or, in the Alternative, Partial Summary Judgment, filed on December 1, 2014, is HEREBY GRANTED in its entirety. There being no remaining claims against it in this case, the Court DIRECTS the Clerk's Office to TERMINATE Burlington as a party on March 16, 2015, unless K&J files a timely motion for reconsideration of the instant Order ( 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
FOUNDERS INSURANCE COMPANY,
)
)
Plaintiff,
)
)
vs.
)
)
KIM & JON, INC.,
)
)
)
Defendant.
_____________________________ )
CIVIL 14-00312 LEK-BMK
ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFF FOUNDERS INSURANCE COMPANY’S MOTION FOR
SUMMARY JUDGMENT AND GRANTING THIRD-PARTY DEFENDANT
THE BURLINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY
JUDGMENT OR, IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT
Before the Court are: (1) Plaintiff Founders Insurance
Company’s (“Founders”) Motion for Summary Judgment (“Founders
Motion”), filed on November 4, 2014; and (2) Third-Party
Defendant The Burlington Insurance Company’s (“Burlington”)
Motion for Summary Judgment or, in the Alternative, Partial
Summary Judgment (“Burlington Motion,” collectively “Motions”),
filed on December 1, 2014.
[Dkt. nos. 27, 35.]
Defendant/Third-
Party Plaintiff Kim & Jon, Inc. (“K&J”) filed its memoranda in
opposition on January 16, 2015, and Founders and Burlington each
filed its reply on January 23, 2015.
[Dkt. nos. 42, 43, 47, 51.]
The Court finds these matters 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”).
After careful consideration of the Motions,
supporting and opposing memoranda, and the relevant legal
authority, the Founders Motion is HEREBY GRANTED IN PART AND
DENIED IN PART, and the Burlington Motion is HEREBY GRANTED for
the reasons set forth below.
BACKGROUND
I.
Procedural Background
On July 8, 2014, Founders filed this declaratory
judgment action, pursuant to 28 U.S.C. §§ 2201, 2202 and Fed. R.
Civ. P. 57, requesting declaratory judgments that it has no duty
to defend K&J (“Count I”) or indemnify K&J (“Count II”), and that
it is entitled to reimbursement by K&J (“Count III”), related to
the lawsuit Davis v. Custard, et al., Civil No. 13-1-3129-11
(RAN), in the Circuit Court of the First Circuit, State of
Hawai`i (“State Case”).
On September 24, 2014, K&J filed its
answer and a third-party complaint against Burlington (“ThirdParty Complaint”), seeking a declaratory judgment that Burlington
has a duty to defend and indemnify K&J related to the State Case
(“Third-Party Count I”) and requesting attorneys’ fees and costs
related to the State Case and the instant case (“Third-Party
Count II”).
[Dkt. no. 13.]
Founders moves for summary judgment
as to all counts in its Complaint, and Burlington moves for
summary judgment as to Third-Party Count I.
2
II.
Factual Background
The following facts are undisputed.1
On November 27, 2013, Darius Davis (“Davis”) filed his
complaint (“State Complaint”) against Claude Custard (“Custard”)
and K&J, doing business as Princess Palace aka Club 21,2
alleging: assault and battery against Custard (“State Count I”);
negligence against Custard (“State Count II”); negligence against
K&J (“State Count III”); and gross negligence against both
Custard and K&J (“State Count IV”).
Founders CSOF at ¶¶ 1, 3;
Burlington CSOF at ¶¶ 4,6; see also Founders CSOF, Decl. of
1
On November 4, 2014, Founders filed its Separate and
Concise Statement in Support of Plaintiff Founders Insurance
Company’s Motion for Summary Judgment (“Founders CSOF”) and, on
December 1, 2014 Burlington filed its Separate and Concise
Statement in Support of the Burlington Insurance Company’s Motion
for Summary Judgment or, in the Alternative, Partial Summary
Judgment (“Burlington CSOF”). [Dkt. nos. 28, 35-2.] Rather than
filing its own counter-statements, K&J filed a CSOF “in Support
of its Memorandum in Opposition to” the Motions (“K&J CSOF”), to
which Burlington filed a response (“Burlington Counter-CSOF”).
[Dkt. nos. 44, 48.] Insofar as K&J failed to oppose the Founders
CSOF and Burlington CSOF, the facts in those CSOFs are deemed
admitted. See Local Rule LR56.1(g) (“For purposes of a motion
for summary judgment, material facts set forth in the moving
party’s concise statement will be deemed admitted unless
controverted by a separate concise statement of the opposing
party.”). The facts that follow in Discussion Section I come
from the Founders CSOF and the Burlington CSOF and the documents
that they and K&J cite, but also are largely consistent with the
K&J CSOF. It is the interpretation of these facts, as discussed
more fully below, which is at the center of this case and the
Motions.
2
For clarity, the Court will refer to the Defendant/ThirdParty Plaintiff as “K&J,” but the night club where the
altercation occurred as “Princess Palace.” It also refers to
Founders and Burlington collectively as “the Insurers.”
3
Mark J. Kaetsu (“Kaetsu Decl.”), Exh. A. (State Complaint) at
pgs. 4-9.3
The State Complaint alleges that, on or about
December 3, 2011, an altercation occurred between Custard and
Davis, who were then patrons at Princess Palace (“the Incident”).
It alleges:
16.
While Defendant Princess Palace served
alcohol to Defendant Custard, Defendant
Custard became intoxicated or otherwise under
the influence of liquor.
17.
While Defendant Custard was under the
influence of liquor, Defendant Princess
Palace continued to serve alcohol to
Defendant Custard.
18.
Because of his intoxication, Defendant
Custard got into an argument, quarrel and/or
altercation with Plaintiff and his friends on
the Princess Palace premises.
19.
During this argument, quarrel, and/or
altercation, Defendant Princess Palace did
nothing to prevent or suppress this conduct.
20.
As a result, this argument, quarrel and/or
altercation escalated to Plaintiff being shot
Plaintiff [sic] multiple times by Defendant
Custard on the Princess Palace premises.
[State Complaint at ¶¶ 16-20.]
While State Count I alleges an intentional assault and
battery by Custard, [id. at ¶¶ 22-24,] State Count II alleges
3
Burlington also filed the State Complaint as an exhibit to
its CSOF. [Burlington CSOF, Request for Judicial Notice in
Support of the Burlington Insurance Company’s Motion for Summary
Judgment or, in the Alternative, Partial Summary Judgment, Exh.
1.]
4
that the shooting was due to Custard’s negligence [id. at ¶¶ 2527].
Specifically, State Count II alleges that Custard was
negligent in:
a.
Carrying and/or possessing a deadly weapon
while under the influence of alcohol;
b.
Operating and/or using a deadly weapon in a
reckless and/or careless manner;
c.
Operating and/or using a deadly weapon with
intent to kill and or/cause serious bodily
harm and injury; and
d.
Such other acts of negligence to be disclosed
during discovery and/or shown at trial.
[Id. at ¶ 26.]
In State Count III, the Complaint alleges that K&J was
negligent in: serving alcohol to people who were known to be
intoxicated and/or heavy drinkers; permitting and encouraging
intoxicated individuals to continue drinking on its premises;
failing to prevent or suppress disorderly conduct; failing to
remove intoxicated individuals from Princess Palace; and failing
to have proper security and/or supervision near its premises.
[Id. at ¶¶ 29a.-h.]
The State Complaint alleges that the
shooting incident “was directly and proximately caused by” these
negligent acts.
[Id. at ¶ 29.]
Similarly, State Count IV
centers on the allegation that K&J “acted in conscious disregard
for the safety of others” in violating statutes regulating the
service of liquor, which caused the shooting.
[Id. at ¶ 34.]
Essentially, State Counts III and IV allege that K&J is liable
5
for the incident due to its purportedly illicit service of
beverages to intoxicated individuals, and its failure to stop the
altercation before it escalated.
Founders issued liquor liability insurance, policy
number ELHI100022, to K&J (“Founders Policy”), which was in
effect on December 3, 2011.
[Founders CSOF at ¶¶ 5-6 (citing
id., Declaration of John Anderson, Exh. B (Founders Policy)).]
The Founders Policy states:
- We will pay those sums that an “insured” becomes
legally obligated to pay as damages because of
“injury” to which this insurance applies if
liability for such “injury” is imposed on an
“insured” by reason of the selling, serving, or
furnishing of any alcoholic beverage; and
- We will defend an “insured” against seeking
those damages.
[Founders Policy at 4.4]
However, among the “Exclusions to
Coverage” is the following:
This insurance does not apply to:
K.
Assault and/or Battery
“Injury” arising from:
(1) assault and/or battery committed by an
“insured”, any “employee” of an “insured”, or
any other person;
(2) The failure to suppress or prevent
assault and/or battery by any person in
4
Since each policy in this case is comprised of multiple
documents, the Court refers to the exhibit’s page number from the
court’s Case Management/Electronic Case Files (CM/ECF) system in
discussing these exhibits.
6
subparagraph k.(1) above; [or]
(3) The selling, serving or furnishing of
alcoholic beverages which results in an
assault and/or battery; . . .
. . . .
[Id. at 5 (“Exclusion K”) (emphasis in original).]
On April 1,
2014, counsel for Founders sent a letter to K&J agreeing to
provide it with a defense in the State Case.
The letter included
a reservation of rights, and argued that K&J was not covered due
to Exclusion K.
[Founders CSOF at ¶ 9 (citing Kaetsu Decl., Exh.
C (“Reservation of Rights Letter”)).]
Exclusion K is also the
basis for the instant case, and the Founders Motion.
[Complaint
at ¶¶ 9-17; Mem. in Supp. of Founders Motion at 2-3, 7-9.]
Similarly, Burlington issued commercial general
liability insurance, policy number 087B005102, to K&J
(“Burlington Policy”), which was also in effect on December 3,
2011.
[Burlington CSOF at ¶ 1 (citing id., Declaration of
Liz Jones, Exh. A (Burlington Policy)).]
The Burlington Policy
states:
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. We will have the right and
duty to defend the insured against any “suit”
seeking those damages. However we will have no
duty to defend the insured against any “suit”
seeking damages for “bodily injury” or “property
damage” to which this insurance does not apply.
[Burlington Policy at 28.]
One exclusion, titled “EXCLUSION -
7
ASSAULT, BATTERY OR OTHER PHYSICAL ALTERCATION,” reads in
pertinent part:
D.
This insurance does not apply to:
a.
Assault Battery Or Other Physical Altercation
“Bodily injury” or “property damage”:
(1) Expected or intended from the standpoint
of any insured.
(2) Arising in whole or in part out of any
“assault” or “battery” committed or attempted
by any person.
(3) Arising in whole or in part out of any
attempt by any person to avoid prevent,
suppress or halt any actual or threatened
“assault” or “battery.”
(4) Arising in whole or in part out of any
actual or threatened verbal or physical
confrontation or altercation committed or
attempted by any person, or any attempt by
any person to avoid, prevent, suppress or
halt any actual or threatened verbal or
physical confrontation or altercation.
. . . .
F.
This insurance does not apply to:
Assault, Battery Or Other Physical Altercation
Any “damages arising out of any actual, alleged or
threatened “assault” or “battery”.
G.
The exclusions added in paragraphs D, E and F of
this endorsement apply to all acts or omissions,
including any act or omission in responding to or
failing to respond or render aid, medical or
otherwise, to any victim of the “assault” or
“battery”, and all theories of liability (direct
or vicarious) asserted against any insured,
including but not limited to all theories of
8
negligence, gross negligence, recklessness or
intentional tort and shall not be subject to any
severability or separation of insureds provision
in the policy.
H.
The following are added to the Definitions Section
of this policy:
“Assault” means any willful attempt or threat to
inflict injury upon the person of another, when
coupled with an apparent present ability so to do,
and any intentional display of force such as would
give a victim reason to fear or expect immediate
harm.
“Battery” means wrongful physical contact with a
person without his or her consent that entails
some injury or offensive touching.
[Id. at 53-54 (Form BG-G-042 02 11 (“Exclusion BG-11”)) (emphases
in original).]
On March 3, 2014, Burlington disclaimed coverage
and a duty to defend in the State Case.
at ¶ 29.]
[Burlington Counter-CSOF
Burlington argues in its motion that K&J is not
covered related to the Incident due to Exclusion BG-11.
[Burlington Motion at 1-2.]
DISCUSSION
In its Complaint and motion, Founders argues that
Exclusion K precludes coverage for K&J related to the Incident,
and therefore it has no duty to defend or indemnify K&J.
in Supp. of Founders Motion at 2-3, 7-9.]
[Mem.
Likewise, Burlington
argues in its motion that Exclusion BG-11 excludes coverage for
all claims in the State Complaint.
[Burlington Motion at 1-2.]
K&J concedes that “the only dispute is over whether an
‘assault and/or battery’ exclusion contained within [each Policy]
9
operates to relieve [the insurer] of its duty to provide K&J
coverage[.]”
[Mem. in Opp. to Founders Motion at 13.5]
K&J
argues that summary judgment is premature since material issues
remain in dispute as to whether: (1) State Claims III and IV fall
completely within the Policies’ Exclusions;6 and (2) K&J
reasonably expected the Policies to cover assaults such as the
Incident.7
The Court considers each of these arguments in turn,
after first considering its jurisdiction over the case.
I.
Jurisdiction
As an initial matter, K&J requests in its memoranda in
opposition that this Court decline to assert jurisdiction in this
case.
It argues that: in declaratory judgment actions,
jurisdiction is discretionary; the insurance issues here turn on
Hawai`i state law; and this dispute grows out of the Incident and
5
Since the memoranda in opposition are nearly identical,
the Court will only cite to the Memorandum in Opposition to the
Founders Motion, even where the same arguments can be found in
both memoranda. The Court will only refer to the Memorandum in
Opposition to the Burlington Motion where an argument appears
solely in that memorandum.
6
In this Order, the Court refers to the Founders Policy
and the Burlington Policy collectively as the “Policies,” and
Exclusion K and Exclusion BG-ll as the “Exclusions.”
7
K&J also argues that the Court should delay ruling on the
Motions since material issues of fact remain as to whether the
insurance agent who sold the Policies to K&J had actual or
apparent authority to bind the Insurers. As the Court describes
below, see infra Discussion Section IV, this issue is not
material to the Motions, and thus the Court does not analyze it
at length in this Order.
10
thus this case is intertwined with the State Case.
30.]
[Id. at 28-
The Court rejects this argument.
The Ninth Circuit has explained:
The Brillhart factors remain the philosophic
touchstone for the district court.[8] The
district court should avoid needless determination
of state law issues; it should discourage
litigants from filing declaratory actions as a
means of forum shopping; and it should avoid
duplicative litigation. [Cont’l Cas. Co. v.]
Robsac [Indus.], 947 F.2d [1367,] 1371–73 [(9th
Cir. 1991)]. If there are parallel state
proceedings involving the same issues and parties
pending at the time the federal declaratory action
is filed, there is a presumption that the entire
suit should be heard in state court. Chamberlain
v. Allstate Ins. Co., 931 F.2d 1361, 1366–67 (9th
Cir. 1991). The pendency of a state court action
does not, of itself, require a district court to
refuse federal declaratory relief. Id. at 1367.
Nonetheless, federal courts should generally
decline to entertain reactive declaratory actions.
However, there is no presumption in favor of
abstention in declaratory actions generally, nor
in insurance coverage cases specifically. “We
know of no authority for the proposition that an
insurer is barred from invoking diversity
jurisdiction to bring a declaratory judgment
action against an insured on an issue of
coverage.” Aetna Cas. & Sur. Co. v. Merritt, 974
F.2d 1196, 1199 (9th Cir. 1992).
Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.
1998) (footnote omitted).
Contrary to K&J’s arguments, the
Brillhart factors clearly weigh in favor of this Court retaining
jurisdiction.
8
The Ninth Circuit here refers to Brillhart v. Excess
Insurance Co. of America, 316 U.S. 491 (1942).
11
Although the issues in this case do turn on state law,
they are not in any way intertwined with the issues in the State
Case and, as discussed more fully below, this Court need not
determine whether an assault actually occurred.
Thus, there will
be no needless determination of state law, or danger of
duplicative litigation.
Further, K&J does not argue, and there
is no evidence in the record, that Founders has engaged in forum
shopping.
As in many insurance disputes, Founders has properly
brought this action in this district court based on diversity
jurisdiction.
Finally, none of the other considerations that the
Ninth Circuit discussed in Dizol are present here: this action
serves a useful purpose; there is no entanglement of the issues
between this case and the State Case, and thus no danger of a res
judicata advantage; and it would actually be inconvenient to
decline jurisdiction at present, since the briefing on the
Motions is complete and this Order disposes of most of the case.
See Dizol, 133 F.3d at 1225 n.5.
For all of these reasons, the
Court CONCLUDES that it is proper to retain jurisdiction and
DENIES K&J’s request to decline it.
The Court now turns to the parties’ substantive
arguments.
II.
Coverage
K&J argues, in essence, that even if the basic theory
of Custard’s assault for intentionally shooting Davis falls
12
within the Exclusions, K&J could theoretically be found liable if
Custard inadvertently, but negligently, shot Davis and the factfinder concluded that K&J’s negligent practices were a proximate
cause for the harm.
K&J posits that the gun might have
discharged accidentally or Custard may have “drawn his firearm in
self-defense and negligently injured” Davis.
[Mem. in Opp. to
Founders Motion at 5, 15-16, 21-22.]
The Insurers attack this argument on two grounds.
First, they argue that these theories are inconsistent with the
allegations in the State Complaint.
Second, even if alleged,
they still fall within the Exclusions, and thus K&J is not
covered related to the Incident.
A.
The Claims
The Insurers argue that this Court should apply the
“complaint allegation rule” to determine whether there is any
duty to defend.
Reply at 2-3.
See, e.g., Founders Reply at 5-6; Burlington
The Court agrees that the rule applies.
See e.g.,
Burlington Ins. Co. v. Oceanic Design & Const., Inc., 383 F.3d
940, 944 (9th Cir. 2004) (“Hawaii adheres to the ‘complaint
allegation rule.’” (quoting Pancakes of Hawaii, Inc. v. Pomare
Props. Corp., 85 Hawai`i 286, 944 P.2d 83, 88 (App. 1997)).
Further, it recently described the scope of the duty to defend:
Regarding the duty to defend, the Hawai`i
Supreme Court has held:
13
[T]he duty to defend rests primarily on the
possibility that coverage exists. This
possibility may be remote but if it exists,
the insurer owes the insured a defense. All
doubts as to whether a duty to defend exists
are resolved against the insurer and in favor
of the insured.
Accordingly, in connection with the issue of
its duty to defend, [the insurer bears] the
burden of proving that there [i]s no genuine
issue of material fact with respect to
whether a possibility exist[s] that [the
insured] would incur liability for a claim
covered by the polic[y]. In other words,
[the insurer is] required to prove that it
would be impossible for the [claimant] to
prevail against [the insured] in the
underlying lawsuit[] on a claim covered by
the policies. Conversely, [the insured’s]
burden with respect to its motion for summary
judgment [i]s comparatively light, because it
ha[s] merely to prove that a possibility of
coverage exist[s].
Tri–S Corp. v. W. World Ins. Co., 110 Hawai`i 473,
488, 135 P.3d 82, 97 (2006) (some alterations in
Tri–S) (quoting Dairy Rd. Partners v. Island Ins.
Co., Ltd., 92 Hawai`i 398, 412–13, 992 P.2d 93,
107–08 (2000)).
On the other hand, the Hawai`i Supreme Court
has also held that, “‘if the plaintiff’s complaint
against the insured alleged facts which would have
supported a recovery covered by the policy, it was
the duty of the defendant to undertake the defence
[sic], until it could confine the claim to a
recovery that the policy did not cover.’”
Commerce & Indus. Ins. Co. v. Bank of Hawaii, 73
Haw. 322, 326–27, 832 P.2d 733, 736 (1992)
(emphasis added) (alteration in Commerce & Indus)
(quoting Lee v. Aetna Casualty & Sur. Co., 178
F.2d 750 (2d Cir. 1949) (Hand, J.)). That is, the
duty to defend only extends to “where coverage is
applicable.” Nautilus Ins. Co. v. Lexington Ins.
Co., 132 Hawai`i 283, 294, 321 P.3d 634, 645
(2014) (citations omitted).
14
Burlington Ins. Civil Co. v. Sanford’s Serv. Ctr., Inc., Civil
No. 14-00151 LEK-KSC, 2014 WL 7205483, at *4 (D. Hawai`i Dec. 16,
2014) (alterations in Sanford’s).
The Insurers argue that K&J’s theory of a negligent
shooting was not properly alleged.
at 5-8.
The Court disagrees.
See, e.g., Burlington Reply
Although it is not central to the
State Complaint, it would be possible, within the allegations of
the Complaint, for K&J to be held liable even if the fact-finder
determines Custard did not intentionally shoot Davis.
The
general allegations, supra Background Section II, allege that
Custard’s intoxication caused the altercation, which led to the
shooting, but not that Custard necessarily intended to shoot
Davis.
Furthermore, State Count II specifically alleges that
Custard was negligent in possessing a gun while intoxicated at
Princess Palace and for using the gun carelessly.
Complaint at ¶ 26a., b.]
[State
Thus, if the fact-finder found that
Princess Palace was negligent in serving Custard or not
intervening in altercation, for instance, it could find K&J
liable even if it determined that the shooting was accidental.
Since the Insurers’ first argument fails, the issue
then is whether such liability could fall outside of the
Exclusions such that there is a “possibility that coverage
exists.”
See Sanford’s, 2014 WL 7205483, at *4.
15
B.
The Policies
1.
Founders
Exclusion K provides that there is no coverage for the
“failure to suppress or prevent assault and/or battery” or the
“selling, serving or furnishing of alcoholic beverages which
results in an assault and/or battery[.]”
[Founders Policy at 5.]
Therefore, it clearly applies to the vicarious liability theories
in State Counts III and IV.
However, as K&J points out, the
Founders Policy does not define “assault” or “battery.”
Opp. to Founders Motion at 13.]
[Mem. in
Thus, if the terms “assault” and
“battery” in Exclusion K could be construed as not extending to
K&J’s theories of a negligent shooting, there remains a
possibility of coverage.
The sum and substance of K&J’s argument on this point
is the following:
“A person commits the offense of assault in the
first degree if the person intentionally or
knowingly causes serious bodily injury to another
person.” HRS § 707-710 (Lexis 2014) (emphasis
added). Moreover, “‘Battery’, is an unlawful
touching of another person without his [or her]
consent.” Ozaki v. Ass’n of Apt. Owners, 87
Hawai`i 273, 289, 954 P.2d 652, 668 (App. 1998)
(citations and quotation marks omitted). In the
words of the Hawai`i courts, “[s]ince battery is a
matter of the worst kind of intentions, it is a
tort which frequently justifies punitive damages.”
Id. (emphasis added).
. . . .
. . . In neither [negligence theory] could it be
16
said that Custard committed an assault and battery
necessary for the exclusion to apply.
[Mem. in Opp. to Founders Motion at 14, 16.9]
Thus, K&J argues
that, under Hawai`i law, both “assault” and “battery,”
necessarily require intent.
The Court finds this argument
unpersuasive.
First, assault does not necessarily require intent.
Although under Hawai`i criminal law, first degree assault must be
done “intentionally” or “knowingly,” see Haw. Rev. Stat. § 707710, the related statute on third degree assault provides: “A
person commits the offense of assault in the third degree if the
person: . . . (b) Negligently causes bodily injury to another
person with a dangerous instrument,” see Haw. Rev. Stat. § 707712.
Thus, by K&J’s own logic, using Hawai`i criminal statutes
to define the Founders Policy, “assault” would cover the
purported negligent, but accidental, shooting.10
9
K&J also argues that there are genuine issues of material
fact as to whether Custard actually committed the assault since,
for example, the Insurers have not offered a record of
conviction. [Mem. in Opp. to Founders Motion at 15.] The Court
finds it immaterial whether or not a state court did (or does)
find that Custard committed the act. The issue is whether a
fact-finder could conceivably find that Custard accidentally or
carelessly shot Davis. See Sanford’s, 2014 WL 7205483, at *4.
10
Moreover, Black’s Law Dictionary 137-38 (10th ed. 2014)
shows that assault does not require intent. For example, it
defines “simple assault” as follows:
“(1) Simple Assault. A person is guilty of
assault if he: (a) attempts to cause or purposely,
(continued...)
17
Second, battery does not traditionally require intent
to harm.
If battery is simply an “unlawful touching,” see State
v. Pesentheiner, 95 Hawai`i 290, 298, 22 P.3d 86, 94 (Ct. App.
2001) (“battery is an unlawful touching of another person without
his or her consent” (alterations, citation and internal quotation
marks omitted)), it would cover K&J’s negligence theories.
Ozaki is not to the contrary.
The legal proposition
that K&J cites does not apply since it analyzed whether, in a
wrongful death lawsuit, battery could give rise to punitive
damages, not whether intent itself was required for liability for
battery.
Ozaki, 87 Hawai`i at 289, 954 P.2d at 668.
K&J misquotes the statement from the case.
Further,
In Ozaki, the Court
quoted Prosser and Keeton § 9, at 40: “Since battery usually is a
matter of the worst kind of intentions . . . .”
added).
Id. (emphasis
K&J’s omission of “usually” makes it appear that battery
must include intention; however, the Hawai`i Intermediate Court
of Appeals (“ICA”) did not hold so broadly.
Moreover, although battery often includes some form of
intent, it is not necessarily the intent to harm.
Rather, as
Black’s Law Dictionary 182 (10th ed. 2014) describes, the act
10
(...continued)
knowingly or recklessly causes bodily injury to
another; or (b) negligently causes bodily injury
to another with a deadly weapon; or ( c ) attempts
by physical menace to put another in fear of
imminent serious bodily injury.” Model Penal Code
§ 211.1 (1997).
18
must simply be done in a “hostile manner.”11
Both the State
Complaint, and K&J’s negligence theories provide that Custard had
that hostile intent, whether or not the gun accidentally
discharged.
Since both assault and battery commonly are not limited
to intent to harm – but rather encompass negligent acts, such as
those argued by K&J – the Court FINDS that the Incident
necessarily falls within Exclusion K.
2.
Burlington
Exclusion BG-11 in the Burlington Policy clearly
encompasses all of K&J’s theories, in part, because it supplies
11
The complete definition of the tort of battery from
Black’s Law Dictionary is as follows (bold added; italics in
original):
A nonconsensual, intentional, and offensive
touching of another without lawful justification,
but not necessarily with the intent to do harm or
offense as required in a criminal battery. . . .
“A battery is the actual application of force to
the body of the prosecutor. It is, in other
words, the assault brought to completion. Thus,
if a man strikes at another with his cane and
misses him, it is an assault; if he hits him, it
is a battery. But the slightest degree of force
is sufficient, provided that it be applied in a
hostile manner; as by pushing a man or spitting in
his face. Touching a man to attract his attention
to some particular matter, or a friendly slap on
the back is not battery, owing to the lack of
hostile intention.” 4 Stephen’s Commentaries on
the Laws of England 62–63 (L. Crispin Warmington
ed., 21st ed. 1950).
19
broad definitions for assault and battery.
It states, in
pertinent part: “This insurance does not apply to: ‘Bodily
injury’ . . . (2) Arising in whole or in part out of any
‘assault’ or ‘battery’ committed or attempted by any person.”
[Burlington Policy at 53.]
While the definition of assault in
Exclusion BG-ll includes willful acts, it also includes threats.
[Id. at 53-54.]
Further, the definition of battery clearly
includes unintentional acts: “‘Battery’ means wrongful physical
contact with a person without his or her consent that entails
some injury or offensive touching.”
[Id. at 54.]
Thus, assault
and battery, as defined by the Burlington Policy, covers an
accidental or careless shooting.
Moreover, there is an even broader clause within
Exclusion BG-11, which does not rely on the definitions of
assault and battery.
It states: “This insurance does not apply
to: ‘Bodily injury’ . . . (4) Arising in whole or in part out of
any actual . . . physical altercation committed . . . by any
person[.]”
[Id. at 53.]
Whether or not the shooting was
accidental, it arose from a physical altercation and thus falls
within this exclusion.
Furthermore, the Burlington Policy clearly covers the
theories of vicarious liability stated in State Counts III and
IV.
Exclusion BG-11 extends to “all theories of liability
(direct or vicarious) asserted against any insured, including but
20
not limited to all theories of negligence, [or] gross
negligence[.]”
[Id.]
For all of these reasons, the Court FINDS
that, applying the complaint allegation rule, there is no
possibility of coverage under the Burlington Policy.
C.
Conclusion
Since the Insurers have shown that there is no genuine
issue of material fact as to whether there is any possibility of
coverage under either of the Policies, the Court CONCLUDES that
the Policies do not confer upon the Insurers any duty to defend.
See Sanford’s, 2014 WL 7205483, at *4.12
III. Reasonable Expectations
K&J argues that, even if the Policies do not
technically cover the Incident, the Insurers owe it the duty to
defend since it had a reasonable expectation that the Policies
would cover an assault such as the Incident.
Founders Motion at 22-26.]
[Mem. in Opp. to
In support of its argument, K&J
offers the Declaration of Charles R. Stevenson (“Stevenson
12
Great Southwest Fire Insurance Co. v. H.V. Corp., 3 Haw.
App. 664, 658 P.2d 337 (1983), which K&J relies heavily on, see
Mem. in Opp. at 16-18, 21-22, is not to the contrary. The
assault and battery exclusion at issue in that case was not
nearly as detailed as the Exclusions in this case, and thus the
ICA was unable to determine whether there was a possibility of
coverage. Further, the Court questions whether Great Southwest
Fire Insurance is still good law insofar as the ICA assumed it
was material whether the defendant in the underlying case had
actually committed the assault, which is clearly not required
under the complaint allegation rule or the law set forth above.
21
Decl.”).
Stevenson, the manager of Princess Palace,13 attests
that: although he asked whether the Policies would cover K&J for
anything that might happen in a night club, the insurance agent
who sold the Policies to him never reviewed the assault and
battery exclusions; he assumed that assault would be covered; he
never reviewed the Policies or received copies of them; and he
would never have purchased the Policies if he had known about the
Exclusions, and would have purchased additional coverage to cover
such incidents.
[K&J CSOF, Stevenson Decl. at ¶¶ 5-6, 9-12, 14.]
K&J concedes, however, that “the ‘reasonable
expectations principle is a rule of construction to be applied
when policy provisions which would deny coverage are unclear or
inconspicuous.’”
[Mem. in Opp. to Founders Motion at 23 (quoting
Crawford v. Ranger Ins. Co., 653 F.2d 1248 (9th Cir. 1981)).]
The Court finds that the Exclusions are neither unclear nor
inconspicuous.
First, K&J does not argue that the Exclusions are
ambiguous or unclear and, in any event, the Court finds that they
are not.14
Second, they are not inconspicuous.
K&J argues that
13
Stevenson actually attests that he is the manager of
“Prince Palace,” [Stevenson Decl. at ¶ 1,] but the Court assumes
that this is a typographical error.
14
Although the Court has analyzed the application of the
Exclusions to the State Complaint at some length in this Order,
it does not find that the Exclusions themselves are ambiguous.
From their plain language, the Exclusions apply to altercations
(continued...)
22
they are “buried” in the Policies.
24.]
[Id. at 1, 6, 7, 8, 13, 23,
With regard to the Founders Policy, the first page states:
“IN CONSIDERATION OF YOUR PAYMENT OF THE PREMIUM, IN RELIANCE
UPON YOUR STATEMENTS IN ANY APPLICATION FORMS (ALL OF WHICH ARE
INCORPORATED HEREIN), AND SUBJECT TO ALL LIMITS, EXCLUSIONS,
CONDITIONS, AND OTHER TERMS OF THIS POLICY, WE AGREE WITH YOU AS
FOLLOWS.”
added).]
[Founders Policy at 4 (emphasis in original; bold
Also on the first page of the policy, immediately after
Section 1, providing for the scope of coverage, Section 2, titled
“Exclusions to Coverage,” begins.
[Id. (emphasis in original).]
Then, on the second page, Exclusion K is clearly enumerated and
titled, “Assault and/or Battery,” in the same font and size as
the other exclusions and terms of the policy.
The Court FINDS
that Exclusion K is neither inconspicuous nor “buried” within the
seven-page Founders Policy.
See Crawford, 653 F.2d at 1251
(applying Hawai`i law and holding that “exclusionary clause [was]
not ‘buried’ inconspicuously in the policy,” because “the heading
and body of the exclusions section [was] the same type size and
intensity as the other sections of the policy”).
The Court reaches the same conclusion as to the
Burlington Policy.
Although the Burlington Policy with its
addenda, including numerous exclusions, is much longer than the
14
(...continued)
among Princess Palace patrons and any vicarious liability that
might arise for K&J from such altercations.
23
Founders Policy, Exclusion BG-11 is not inconspicuous.
It is set
forth in its own document, titled – in large, bold, capital
letters – “EXCLUSION - ASSAULT, BATTERY OR OTHER PHYSICAL
ALTERCATION.”
[Burlington Policy at 53.]
Further, the heading
addressing the scope of the exclusion is in bold, and the body of
the exclusion is in the same font and size as the rest of the
policy.
[Id. at 53-54.]
Last, Exclusion BG-11 is identified
along with approximately thirty forms in a two-page “LISTING OF
FORMS AND ENDORSEMENTS” that immediately precedes the policy
itself.
[Id. at 10-11.]
For these reasons, the Court FINDS that
Exclusion BG-11 is neither inconspicuous nor “buried” within the
Burlington Policy.
Since the Exclusions are neither unclear nor
inconspicuous, the “reasonable expectations principle” does not
apply.
As explained in Crawford: “As noted above this policy is
not ambiguous nor is the exclusionary clause inconspicuously
placed in the policy.
Therefore, the reasonable expectations
principle is inapposite.”
653 F.2d at 1251 (citation omitted);
see also Del Monte Fresh Produce (Hawaii), Inc. v. Fireman’s Fund
Ins. Co., 117 Hawai`i 357, 368, 183 P.3d 734, 745 (2007) (“These
reasonable expectations are derived from the insurance policy
itself, which is subject to the general rules of contract
construction.” (emphasis added) (alteration, citation, and
internal quotation marks omitted)).
24
Since the Court FINDS that
the “reasonable expectation principle” does not apply, K&J is
bound by the unambiguous terms of the Policies.15
IV.
Conclusion
Since the Policies do not cover K&J related to the
State Case, and the reasonable expectations principle does not
apply, there is no genuine issue of material fact as to whether
the Insurers have a duty to defend K&J.
No additional discovery,
which K&J requests, could prove otherwise.16
See Fed. R. Civ. P.
56 (“The court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”).
Further, since they do not have a duty to defend, the
Insurers do not have a duty to indemnify either.
See Nautilus
Ins., 132 Hawai`i at 289, 321 P.3d at 640 (citing Dairy Road
Partners, 92 Hawai`i at 412, 992 P.2d at 107) (“the duty to
15
Other than baldly arguing that it should not be, K&J does
not provide any legal authority for the proposition that it
should not be bound by the terms of the Policies, which it
concedes that it purchased.
16
To the extent that K&J believed that it was misled by
Burlington or Founders, see, e.g., Mem. in Opp. at 23-28, it was
free to bring a counter- or third-party claim. However, it
appears that it may have chosen not to do so because the actual
party that misled it, if any did, is not a party to this action.
Burlington offers evidence that K&J engaged its own insurance
broker, Atlas Insurance Agency, Inc. (“Atlas”), which worked with
Burlington’s broker, Hull & Company, Inc. See Burlington
Counter-CSOF at ¶¶ 15-27; id. Decl. of John T. Kelner & Exhs. 15. Based on the Stevenson Declaration, it would appear that K&J
takes issue with Atlas’s conduct, not Burlington’s or Founders’.
25
defend is broader than the duty to indemnify”).
The Court thus
GRANTS summary judgment for Founders as to Counts I and II in the
Complaint, and GRANTS summary judgment for Burlington on ThirdParty Count I.
Count II.
Similarly, the Court DISMISSES Third-Party
Since Burlington has no duty to defend or indemnify
K&J, it cannot be liable to K&J for attorneys’ fees and costs in
this case or the State Case.
As to Count III of Founders’ Complaint, Founders
apparently moves for summary judgment on this claim as well.
[Founders Motion at 1-2 (“[Founders] respectfully moves this
Honorable Court for an order of granting summary [sic] in its
favor against [K&J] as to all counts in the Complaint.”
(bracketed material in original omitted)).]
However, Founders
has neither mentioned reimbursement in any of its moving papers
nor the sum that it believes that it is entitled to for its
defense.
The Court therefore DENIES the Founders Motion as to
Count III, since it has made no showing on this claim.
Founders
may renew its motion as to Count III should it so choose,
including the sum that it seeks and support for such sum.
CONCLUSION
On the basis of the foregoing, Founders Insurance
Company’s Motion for Summary Judgment, filed on November 4, 2014
is HEREBY GRANTED IN PART AND DENIED IN PART; and The Burlington
Insurance Company’s Motion for Summary Judgment or, in the
26
Alternative, Partial Summary Judgment, filed on December 1, 2014,
is HEREBY GRANTED in its entirety.
There being no remaining claims against it in this
case, the Court DIRECTS the Clerk’s Office to TERMINATE
Burlington as a party on March 16, 2015, unless K&J files a
timely motion for reconsideration of the instant Order.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII,
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
FOUNDERS INSURANCE COMPANY VS. KIM & JON, INC.; CIVIL 14-00312
LEK-BMK; ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF
FOUNDERS INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT AND
GRANTING THIRD-PARTY DEFENDANT THE BURLINGTON INSURANCE COMPANY’S
MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, PARTIAL
SUMMARY JUDGMENT
27
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