Prime Insurance Company v. State of Hawaii Department of Land And Natural Resources et al
Filing
64
ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' 34 MOTION TO DISMISS FIRST AMENDED COMPLAINT AND (2) DENYING 37 PLAINTIFF'S COUNTER-MOTION FOR PARTIAL SUMMARY JUDGMENT. Signed by JUDGE DERRICK K. WATSON on 8/24/2015. ~ Defendants' motion is GRANTED IN PART and DENIED IN PART. Prime is GRANTED until September 21, 2015 to file second amended complaint in accordance with this order. Prime's Counter-Motion for Partial Summary Judgment is DE NIED. (ecs, )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 HAWAI`I
PRIME INSURANCE COMPANY, for
itself and as Subrogee and Assignee of
ALOHA JETSKI, LLC,
Plaintiff,
vs.
OFFSHORE RISK MANAGEMENT,
OFFSHORE RISK MANAGEMENT
INSURANCE SERVICES; ORM
INSURANCE SERVICES; ORM INC.;
and BRUCE WOODS,
CIVIL NO. 14-00545 DKW-KSC
ORDER (1) GRANTING IN PART
AND DENYING IN PART
DEFENDANTS’ MOTION TO
DISMISS FIRST AMENDED
COMPLAINT AND (2) DENYING
PLAINTIFF’S COUNTER-MOTION
FOR PARTIAL SUMMARY
JUDGMENT
Defendants.
ORDER (1) GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED COMPLAINT
AND (2) DENYING PLAINTIFF’S COUNTER-MOTION
FOR PARTIAL SUMMARY JUDGMENT
INTRODUCTION
The parties dispute their obligations under an insurance producer’s
agreement. Defendants Offshore Risk Management Insurance Services (“ORM”)
and Bruce Woods served as brokers for the insured, Aloha Jetski, LLC, on a policy
underwritten by Prime Insurance Company (“Prime”). In the aftermath of the
settlement of a state tort action on behalf of Aloha Jetski, Prime brings the instant
action against ORM and Woods.
Defendants move to dismiss all of the claims against them. Prime, for itself
and as subrogee and assignee of Aloha Jetski, filed a counter-motion for summary
judgment on its breach of contract claim. Because Prime fails to establish on the
current record that it is a party to the relevant producer’s agreement, Defendants’
motion to dismiss is granted in part, and Prime is granted leave to file a second
amended complaint. Prime’s counter-motion for partial summary judgment is
denied for the reasons set forth below.
BACKGROUND
During the relevant time period, Prime sold surplus lines of insurance
through State-licensed insurance brokers, including ORM and Woods. Complaint
¶¶ 1-4. Prime alleges that on March 23, 2010, ORM and Prime entered into an
Independent Producer’s Agreement (“Agreement”) establishing their respective
rights and obligations for insurance policies produced by ORM and underwritten
by Prime. Complaint, Ex. A (Agreement). According to Prime, the Agreement
limits ORM’s authority to act on behalf of Prime without Prime’s prior express
written instructions, and requires ORM to indemnify Prime against any claims or
2
costs that Prime may become obligated to pay as a result of any loss to an insured
caused directly or indirectly by ORM. Complaint ¶¶ 7-8.
ORM contends that it did not contract with Prime through an independent
producer’s agreement. ORM asserts that on the face of the Agreement, Insurance
Exchange Brokerage Service, Inc. (“IEBS”) is the contracting entity through which
Prime conducted business with ORM. According to ORM, it entered into the
Agreement with IEBS through Underwriters Direct Access (“UDA”), and UDA
was an entity through which IEBS conducted business with ORM.
In the present dispute, Woods served as Aloha Jetski’s insurance broker to
locate insurers who were willing to issue liability insurance policies to cover its
operations. On or about January 17, 2012, Aloha and Woods signed an application
for liability insurance (“Application”) containing representations and warranties.
Complaint, Ex. B (Application). Prime issued Policy No. SC1201622 to Aloha
Jetski for the period from January 18, 2012 through January 18, 2013 (the
“Policy.”). Complaint, Ex. C (Policy). As the Policy’s “producer,” ORM received
a commission for its placement with Prime. Complaint ¶¶ 9-10.
Aloha Jetski held a state Department of Land and Natural Resources
(“DLNR”) permit to rent jet skis for use in Keehi Lagoon. On or about August 5,
2012, Aloha rented a jet ski to Tyson Dagley, and while operating the jet ski,
3
Dagley collided with and killed another Aloha Jetski client, Kristen Fonseca.
Fonseca’s estate and survivors filed a wrongful death lawsuit in Hawai‘i state court
against Dagley, Aloha Jetski and its owner Glenn Cohen. They also filed a state
court declaratory action against Prime, ORM, and Woods, arguing that Aloha
Jetski’s Policy violated a DLNR regulation applicable to commercial permit
holders, mandating liability insurance coverage of not less than $500,000. The
Policy contained a limit of liability of $100,000 per person that was eroded by
defense costs.1 The damages sought in the case against Aloha Jetski by the
Fonseca plaintiffs substantially exceeded the Policy’s limits. Complaint ¶ 11.
Prime explains that in an April 4, 2014 ruling in the declaratory judgment
action, the state court judge denied its motion for summary judgment, which
sought a declaration that the Policy complied with the regulatory requirements
applicable to Aloha Jetski’s operations and that the Policy should be enforced
according to its limits and terms. The state court judge instead indicated that the
Policy’s terms and limits did not satisfy regulatory requirements, were contrary to
public policy and should not be enforced. According to the instant complaint,
1
The record indicates that the DLNR never cited Aloha Jetski or suspended Aloha Jetski’s
DLNR-issued permit, despite being provided with a certificate of insurance showing that the
amount of insurance purchased by Aloha Jetski was below the minimum required by DLNR
regulations. See Ex. H attached to Woods Decl. (1/19/2012 Certificate of Insurance).
4
before further rulings were made in the state court actions, the parties in the
coverage and liability cases negotiated a global settlement. Woods and ORM,
whom the Fonseca plaintiffs had dismissed from the coverage case, did not
participate in the settlement. Woods and ORM declined Prime’s request for
contribution to the settlement or reimbursement of Prime for its contribution. The
settlement requires Prime to pay in excess of the Policy limits. Complaint ¶¶ 1213. Aloha Jetski has assigned its claims to Prime. Complaint ¶ 15.
Prime alleges the following claims against ORM and Woods: (1) breach of
contract based on the Agreement (Count I); (2) negligence (Count II); (3) negligent
misrepresentation (Count III); (4) promissory estoppel (Count IV); (5) unfair and
deceptive acts and practices in violation of Hawaii Revised Statutes (“HRS”)
§ 480-2 (Count V); and (6) punitive damages (Count VI). ORM and Woods now
ask the Court to dismiss all of the claims against them. Prime seeks partial
summary judgment on Count I.
STANDARD OF REVIEW
I.
Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss for
failure to state a claim upon which relief can be granted. Pursuant to Ashcroft v.
Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual
5
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554,
570 (2007)). “[T]he tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.” Id. Accordingly,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).
Rather, “[a] claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Factual
allegations that only permit the court to infer “the mere possibility of misconduct”
do not constitute a short and plain statement of the claim showing that the pleader
is entitled to relief as required by Rule 8(a)(2). Id. at 679.
Under Rule 12(b)(6), review is generally limited to the contents of the
complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001);
Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). However, courts
may “consider certain materials—documents attached to the complaint, documents
incorporated by reference in the complaint, or matters of judicial notice—without
converting the motion to dismiss into a motion for summary judgment.” United
States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
6
II.
Motion for Summary Judgment
Pursuant to Federal Rule of Civil Procedure 56(a), a party is entitled to
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.”
DISCUSSION
I.
Defendants’ Motion to Dismiss
The Court first addresses Woods and ORM’s motion to dismiss. The motion
is granted as to the portions of Counts I, II, IV, and V identified below, with leave
to amend. Count VI, a stand-alone claim for punitive damages, is dismissed
without leave to amend. The motion is denied with regard to Count III.
A.
Breach of Contract (Count I)
Prime alleges that on “March 23, 2010, ORM and Prime entered into an
‘Independent Producer’s Agreement’ (‘Agreement’) that set forth ORM and
Prime’s respective rights and obligations regarding insurance policies produced by
ORM and underwritten by Prime.” Complaint ¶ 7. It further alleges that
“Defendants have breached [various enumerated] provisions of the Agreement,
causing Prime to sustain damages, attorney fees and litigation costs for which it is
entitled to be compensated.” Complaint ¶ 18. Woods and ORM move to dismiss
on the grounds that neither Woods nor Prime is a party to the Agreement.
7
A breach of contract claim must set forth (1) the contract at issue; (2) the
parties to the contract; (3) whether plaintiff performed under the contract; (4) the
particular provision of the contract allegedly violated by defendants; and (5) when
and how defendants allegedly breached the contract. See Evergreen Eng’rg, Inc. v.
Green Energy Team LLC, 884 F. Supp. 2d 1049, 1059 (D. Haw. 2012); see also
Otani v. State Farm Fire & Cas. Co., 927 F. Supp. 1330, 1335 (D. Haw. 1996) (“In
breach of contract actions, . . . the complaint must, at minimum, cite the
contractual provision allegedly violated. Generalized allegations of a contractual
breach are not sufficient . . . the complaint must specify what provisions of the
contract have been breached to state a viable claim for relief under contract law.”)).
The contract upon which Count I is based is the Independent Producer’s
Agreement attached as Exhibit A to the complaint. Prime does not dispute that
Woods is not a party to the Agreement. His name does not appear anywhere in the
Agreement, the complaint does not allege that Woods assumed any obligation
under the Agreement, or that his conduct amounted to a breach thereof.2 See Prime
Counter-Motion at 7 (“The [complaint] alleges that ORM entered into a contract
with Prime, ORM breached multiple provisions of the contract, and Prime suffered
2
Prime alleges that Woods signed the Application on behalf of Aloha Jetski, but that Application
does not serve as the basis for Count I’s breach of contract claim.
8
damages as a result of ORM’s breaches.”); id. at 10 (“The [complaint] alleges that
ORM executed a contract (the Agreement), ORM breached the contract by failing
to ensure that the Policy complied with Hawai‘i’s regulations and by failing to
indemnify or reimburse Prime after it suffered damages, and Prime suffered
damages as a result of ORM’s breaches.”). Accordingly, the motion is
GRANTED, and Count I is DISMISSED for failure to state a claim against Woods.
The Court next turns to whether Prime is a party to the Agreement.
Although the complaint alleges that Prime and ORM executed the Agreement (see
complaint ¶ 7), the Agreement itself states that the parties are Insurance Exchange
Brokerage Service, Inc. (“IEBS”), “and/or any other entity through which IEBS
conducts business”, and “ORM Insurance Services and ORM, Inc.” In other
words, it is not evident upon review of the Agreement that Prime is a contracting
party with standing to enforce the Agreement. The Court need not accept as true
allegations that contradict matters properly subject to judicial notice or allegations
contradicting the exhibits attached to the complaint. Sprewell, 266 F.3d at 988;
Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010) (“We accept
as true all well-pleaded allegations of material fact, and construe them in the light
most favorable to the non-moving party. We are not, however, required to accept
as true allegations that contradict exhibits attached to the Complaint or matters
9
properly subject to judicial notice, or allegations that are merely conclusory,
unwarranted deductions of fact, or unreasonable inferences.”) (citations omitted).
Although Prime attempts to introduce evidence demonstrating that IEBS and
Prime are entities through which one conducts business via the other,3 the
complaint does not allege facts establishing that Prime is a third-party beneficiary
of the Agreement or otherwise specify how Prime has any legal rights under the
Agreement. Accordingly, as currently pled, Count I fails to state a claim for
breach of contract as to Prime, although amendment may be possible. See Harris
v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009) (“Dismissal without leave to
amend is improper unless it is clear that the complaint could not be saved by any
amendment.” (citation and quotation marks omitted)). Count I is therefore
DISMISSED with leave to amend.
3
Although the parties cite to declarations and exhibits in support of their arguments, the Court
treats Woods and ORM’s motion brought pursuant to Rule 12(b)(6) as a motion to dismiss for
failure to state a claim and limits its review to that context. The Court will not convert
Defendants’ motion into one for summary judgment. The Court may consider documents
attached to the complaint—including the Agreement and Application—documents incorporated
by reference in the complaint, or matters of judicial notice, without converting the motion to
dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 908 (9th
Cir. 2003).
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B.
Negligence (Count II)
In Count II, Prime brings a negligence claim against Woods and ORM on
behalf of Aloha Jetski –
20.
As Aloha’s agents regarding insurance procurement,
Woods and ORM owed a duty to use reasonable care in
investigating Aloha’s insurance needs and advising
Aloha on insurance procurement.
21.
Woods’ and ORM’s conduct in assisting Aloha in the
procurement of liability insurance fell below this
standard of care.
Complaint ¶¶ 20-21.
In addition to the claim asserted on behalf of Aloha Jetski, Prime also
attempts to bring a negligence claim on its own behalf –
22.
As a producer of coverage underwritten by Prime, Woods
and ORM owed a duty to use reasonable care to ensure
that the application materials submitted by Aloha
included all relevant and material information necessary
for Prime to accurately and completely assess Aloha’s
application.
23.
Wood’s and ORM’s conduct in submitting Aloha’s
liability insurance application to Prime fell below this
standard of care.
24.
The harm caused by Wood’s and ORM’s failure to
satisfy their duties to Aloha and Prime to use reasonable
care became evident on April 4, 2014, when the [state
court summary judgment] Order was issued.
11
25.
As a direct and proximate consequence of Defendants’
violations of their duty to use reasonable care, Aloha and
Prime suffered losses for which Prime is entitled to be
compensated both for itself and as Subrogee and
Assignee of Aloha.
Complaint ¶¶ 22-25.
ORM and Woods argue that they were not Prime’s agents and therefore
owed no tort duty to Prime. They acknowledge that ORM was Aloha Jetski’s
agent, but argue that Aloha Jetski has no claim to assign to Prime because Aloha
Jetski has not suffered any damages since it incurred no obligation to pay money
for the Fonseca settlement.
Defendants’ motion is granted with respect to Prime’s negligence claim
brought on its own behalf, but denied with respect to the claim brought on behalf
of Aloha Jetski. The Court first addresses Prime’s claim for negligence on its own
behalf.
In order to succeed on a claim for negligence, a party must show:
1. A duty, or obligation, recognized by the law, requiring the actor to
conform to a certain standard of conduct for the protection of others
against unreasonable risks;
2. A failure on [the defendant’s part] to conform to the standard
required;
3. A reasonably close causal connection between the conduct and the
resulting injury; [and]
12
4. Actual loss or damage resulting to the interests of another.
White v. Sabatino, 415 F.Supp.2d 1163, 1173 (D. Haw. 2006) (citing Ono v.
Applegate, 62 Haw. 131, 137, 612 P.2d 533, 538 (1980)).
Here, Prime fails to allege that ORM or Woods owed it a duty of care that
was breached. In opposition to the motion, Prime identifies no legal duty running
from either ORM or Woods to itself. Rather, it states that “[a]s Aloha’s insurance
broker, ORM’s duty to exercise reasonable care, skill, and diligence required it to
procure an insurance policy for Aloha that complied with Hawai‘i’s law –
including Hawai‘i’s applicable statutory minimum for liability insurance.” Prime
Counter-Motion at 18. While an insurance agent may owe a general duty to
exercise reasonable care in carrying out its duties in procuring insurance, without
identifying a recognized legal duty owed directly to itself, Prime fails to allege a
negligence claim on its own behalf against ORM or Woods. The motion is
GRANTED with respect to this portion of Count II.
The Court next turns to Prime’s claim for negligence brought on behalf of
Aloha Jetski. The right of subrogation is derivative. The subrogated insurer,
known as the ‘subrogee,’ can be subrogated to and enforce only such rights as the
insured, known as the ‘subrogor,’ has against the party whose wrong caused the
13
loss.” State Farm Fire & Cas. Co. v. Pac. Rent–All, Inc., 90 Hawai‘i 315, 329,
978 P.2d 753, 767 (1999). As the State Farm decision explained, “the insurer’s
subrogation rights rest upon the viability of the insured’s claim against the
tortfeasor.” Id. (citation omitted). Here, Prime stands in the shoes of Aloha Jetski,
has no greater rights than the insured, and is subject to the same defenses assertable
against the insured. See Cumis Ins. Soc’y, Inc. v. CU Pac. Audit Solutions, LLC,
2014 WL 6749229, at *3 (D. Haw. Nov. 30, 2014).
ORM and Woods contend that Aloha Jetski suffered no tort damages, and
therefore had no claim to subrogate. However, Count II alleges that, as a result of
“Defendants’ violations of their duty to use reasonable care, Aloha [Jetski] and
Prime suffered losses for which Prime is entitled to be compensated both for itself
and as Subrogee and Assignee of Aloha [Jetski].” Complaint ¶ 24. To the extent
the complaint alleges that Aloha Jetski sustained actual loss or damage as a result
of ORM or Woods’ alleged negligence, it sufficiently includes the required
elements of and states a claim for negligence. As such, the motion is DENIED.
At the hearing on the motions, Prime reiterated that it intended to assert
claims for negligence both on its own behalf and on behalf of Aloha Jetski. As set
forth above, Defendants’ motion to dismiss is GRANTED with respect to Prime’s
claim for negligence on its own behalf and DENIED with respect to the claim for
14
negligence brought on behalf of Aloha Jetski. Because amendment may be
possible, the dismissal is without prejudice, and Prime is granted leave to amend
the dismissed portion of Count II.
C.
Negligent Misrepresentation (Count III)
In Count III, Prime alleges –
27.
As the agent of Aloha, Woods and ORM made
representations regarding the Policy’s compliance with
Hawai‘i laws and regulations applicable to the operations
of Aloha.
28.
The representations were false, incomplete or misleading
as a result of Wood’s and ORM’s failure to use
reasonable care or competence in communicating the
information.
29.
Aloha and Prime relied on the misrepresentation and
suffered harm as a result.
30.
As a direct and proximate consequence of Defendants’
negligent misrepresentations, Aloha and Prime sustained
losses for which Prime is entitled to be compensated both
for itself and as Subrogee and Assignee of Aloha.
Complaint ¶¶ 27-30.
The elements of negligent misrepresentation under Hawai‘i law are as
follows: “(1) false information [was] supplied as a result of the failure to exercise
reasonable care or competence in communicating the information; (2) the person
for whose benefit the information is supplied suffered the loss; and (3) the recipient
15
relies upon the misrepresentation.” Smallwood v. Ncsoft Corp., 730 F. Supp. 2d
1213, 1231 (D. Haw. 2010). A negligent misrepresentation claim under Hawai‘i
law does not require intent, and accordingly is not subject to the pleading
requirements of Federal Rule of Civil Procedure Rule 9(b). See Menashe v. Bank
of New York, 850 F. Supp. 2d 1120, 1137 (D. Haw. 2012); see also Peace
Software, Inc. v. Hawaiian Elec. Co., 2009 WL 3923350, at *6 (D. Haw. Nov. 17,
2009) (Noting that, although some Ninth Circuit cases state that negligent
misrepresentation claims are subject to Rule 9(b), those cases interpreted
California law; in comparison, “the Hawaii Supreme Court does not appear to
[equate] negligent misrepresentation with fraud.”).
Here, Prime sufficiently alleges that (1) Woods and/or ORM supplied false
information regarding the Policy’s compliance with Hawai’i law as a result of the
failure to exercise reasonable care or competence; (2) Prime and Aloha Jetski
suffered losses; and (3) Prime and Aloha Jetski relied upon the misrepresentations.
See Complaint ¶ 9 (“On or about January 17, 2012, Aloha and Woods signed an
application for liability insurance . . . containing representations and warranties
regarding responsibility for the adequacy of insurance and enforceability of
coverage limits”); id. ¶¶ 28-29 (“The representations were false, incomplete or
misleading as a result of Wood’s and ORM’s failure to use reasonable care or
16
competence in communicating the information. Aloha and Prime relied on the
misrepresentation and suffered harm as a result.”). Accordingly, the complaint
contains sufficient factual matter, accepted as true, to state a claim for negligent
misrepresentation that is plausible on its face. The motion is DENIED with respect
to Count III.
D.
Promissory Estoppel (Count IV)
In Count IV, Prime alleges –
32.
As the producer placing Aloha’s liability coverage with
Prime, Woods and ORM promised they would assure
compliance with all regulatory compliance, that they
would defend and indemnify Prime against certain claims
caused directly or indirectly by any act, omission or
misrepresentation by Woods or ORM and that they
would reimburse Prime for any and all losses, costs or
expenses paid or incurred by Prime that resulted from
Woods’ or ORM’s failure to defend and indemnify
Prime.
33.
Woods and ORM expected and foresaw that Prime would
rely on these promises.
34.
Prime relied on the promises to its detriment. Prime
underwrote coverage to Aloha on the understanding that
the Policy complied with applicable statutes and
regulations. When a court disagreed, exposing Aloha and
Prime to liability, Prime spent more than the Policy
required to defend Aloha and agreed to pay damages to
settle the liability claims against Aloha for more than the
Policy required. Prime incurred these losses, and others,
17
with the expectation that Woods and ORM would honor
their promises of defense, indemnity and reimbursement.
35.
Justice requires enforcement of the promises Woods and
ORM made to Prime.
Complaint ¶¶ 32-35.
Under Hawaii law, promissory estoppel contains four elements:
(1) There must be a promise; (2) The promisor must, at the time
he or she made the promise, foresee that the promisee would
rely upon the promise (foreseeability); (3) The promisee does in
fact rely upon the promisor's promise; and (4) Enforcement of
the promise is necessary to avoid injustice. The “essence” of
promissory estoppel is “detrimental reliance on a promise.”
Gonsalves v. Nissan Motor Corp. in Haw., Ltd., 100 Hawai‘i 149, 164-65, 58 P.3d
1196, 1211-12 (2002). A promise is “a manifestation of intention to act or refrain
from acting in a specified way, so made as to justify a promisee in understanding
that a commitment has been made.” Id. at 165, 58 P.3d at 1212.
Notwithstanding its equitable nature, Count IV appears to be based on
alleged promises set forth in the Agreement. Paragraph 32, for instance, mirrors
the contract’s indemnification provision. As a result, Count IV lacks facial
plausibility for the same reasons set forth above with respect to Count I. The
relationship between IEBS and Prime is not sufficiently alleged in the complaint.
Without more, the Agreement between IEBS and ORM cannot support the Count
18
IV allegation that promises made by Woods and ORM were actually made to
Prime and foreseeably relied upon by Prime. That is, there are no factual
allegations relating to promises made by Wood or ORM to Prime—only legal
conclusions called into question by the face of the Agreement. See Complaint ¶
32; Ex. A. As was the case with Count I’s breach of contract claim, Count IV’s
promissory estoppel claim is DISMISSED with leave to amend.
E.
Unfair and Deceptive Trade Practices (Count V)
Count V alleges that “Defendants violated Haw. Rev. Stat. § 480-2 by
engaging in . . . unfair and deceptive acts and practices.” Complaint ¶ 39.
Specifically, Prime asserts that –
37.
As set forth in Counts II and III above, Defendants made
material misrepresentations and omitted material and
relevant facts and information that resulted in the
procurement of liability insurance that was insufficient
for Aloha’s operations and that subjected Prime to an
unanticipated regulatory risk for which no premium was
charged.
38.
Defendants’ material misrepresentations and omissions
had a tendency to deceive consumers acting reasonably
under such circumstances and did, in fact, deceive Aloha
and Prime under the circumstances described above.
39.
Defendants violated Haw. Rev. Stat. § 480-2 by engaging
in said unfair and deceptive acts and practices.
19
40.
Defendants’ unfair and deceptive acts and practices
actually and proximately caused actual injury and
damages to Prime for itself and as Aloha’s Assignee and
Subrogee.
Complaint ¶¶ 37-40.
Prime asserts a claim for “unfair and deceptive acts and practices.” HRS
§ 480-2(a) provides that “[u]nfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce are unlawful.” Although
“[a]ny person” may bring an action for unfair methods of competition in violation
of Section 480-2, only consumers, the attorney general, or the director of the office
of consumer protection may bring an action for unfair or deceptive acts or practices
in violation of Section 480-2. HRS § 480-2(d), (e); see also Davis v. Four Seasons
Hotel, Ltd., 228 P.3d 303, 307 (Haw. 2010). A “consumer” is a “natural person
who, primarily for personal, family, or household purposes, purchases, attempts to
purchase, or is solicited to purchase goods or services or who commits money,
property, or services in a personal investment.” HRS § 480-1. Prime does not
purport to be a “consumer.” Rather, in opposition to the motion, it argues that it
sought to bring a claim for unfair methods of competition under HRS § 480-2(e),
not for unfair and deceptive acts and practices.
20
The allegations in Count V, however, do not support a claim for unfair
methods of competition. To state a claim for unfair competition, a plaintiff must
allege facts showing “(1) a violation of HRS chapter 480; (2) which causes an
injury to the plaintiff's business or property; and (3) proof of the amount of
damages.” Davis, 228 P.3d at 315. Prime does not clearly allege how Woods or
ORM’s conduct have or will negatively affect competition. Prime clearly alleges
only that ORM and Woods “violated Haw. Rev. Stat. § 480-2 by engaging in . . .
unfair and deceptive acts and practices,” and that these “unfair and deceptive acts
and practices actually and proximately caused actual injury and damages” to Prime
and Aloha Jetski. Complaint ¶¶ 39-40. These allegations relate to claims for
unfair and deceptive acts and practices—not to claims for unfair methods of
competition.
Accordingly, because Prime is not a “consumer” for purposes of bringing an
unfair and deceptive acts and practices claim, and, because it does not allege the
elements required for an unfair methods of competition claim, Count V fails to
state a claim for violation of HRS § 480-2(a), and the motion is GRANTED.
Because amendment may be possible, Count V is DISMISSED with leave to
amend.
21
F.
Punitive Damages (Count VI)
Count VI requests relief that is derivative of Prime’s other claims. A claim
for punitive damages is not an independent tort, but a remedy that is incidental to
another cause of action. See Ross v. Stouffer Hotel Co. (Hawai‘i) Ltd., 879 P.2d
1037, 1049 (Haw. 1994) (citing Kang v. Harrington, 587 P.2d 285, 291 (Haw.
1978) (holding that a claim for punitive damages “is not an independent tort, but is
purely incidental to a separate cause of action”)); see also United States ex rel.
Lockyer v. Haw. Pac. Health, 490 F. Supp. 2d 1062, 1088-89 (D. Haw. 2007)
(holding that, to the extent the complaint could be read to allege a separate and
independent cause of action for punitive damages, the defendant would be entitled
to summary judgment on that count); Hale v. Hawaii Publs., Inc., 468 F. Supp. 2d
1210, 1233 (D. Haw. 2006) (granting motion for summary judgment as to a
separate claim for punitive damages, but noting that the plaintiff could seek
punitive damages as part of prayer for relief).
Defendants’ motion is GRANTED, and Count VI is DISMISSED
WITHOUT LEAVE to amend to include a stand-alone claim for punitive damages.
Because punitive damages may be available as a remedy for other causes of action,
Prime is granted leave to include such a request in its second amended complaint,
if supported by the allegations therein.
22
The Court next turns to Prime’s counter-motion for partial summary
judgment on Count I.
II.
Prime’s Counter-Motion for Partial Summary Judgment
Prime argues that it is entitled to summary judgment on its breach of
contract claim because ORM violated multiple provisions of the Agreement,
including Paragraphs B, K, and J. In support of its motion, Prime produced
evidence that ORM entered into the Agreement with IEBS—and that Prime is an
entity through which IEBS conducts business—ORM and Woods applied for
Aloha Jetski’s Policy, Prime underwrote the Policy, and Prime paid ORM a
commission for producing Aloha Jetski’s Policy. Declaration of David McBride
(“McBride Decl.”) ¶¶ 3-14, Exs. 6-8 (Application); Declaration of Catherine
Aubuchon (“Aubuchon Decl.”) ¶ 7, Ex. 4 (Agreement).
ORM disputes that Prime has standing to enforce the Agreement. It
contends that IEBS was the entity through which Prime conducted its insurance
business and not the other way around. According to ORM, it entered into the
Agreement with IEBS through UDA, not Prime. Declaration of William J. Coates
(“Coates Decl.”) ¶ 2; id. ¶ 3 (“IEBS was the entity through which Prime conducted
business with ORM.”). In 2012, when Prime issued the Policy to Aloha Jetski,
ORM did not have a producer’s agreement directly with Prime; on July 7, 2013,
23
Prime and ORM entered into an Independent Producer’s Agreement for the first
time. Coates Decl. ¶¶ 3, 5. ORM points to the Declaration of Prime’s corporate
attorney, David McBride, who states that IEBS “provided brokerage services for
and on behalf of Prime.” McBride Decl. ¶ 4. It also points to the Certificate of
Insurance for Aloha Jetski issued by IEBS to the DLNR (see Declaration of Bruce
Woods (“Woods Decl.”) ¶ 19, Ex. H), and Aloha Jetski’s Policy covering the
period from January 18, 2012 until January 18, 2013, which was issued by Prime,
with IEBS listed as Prime’s broker, and Offshore Risk Management listed as
producer. See Prime Ex. 8 at 2-3. According to ORM, these documents are
consistent with IEBS being the entity through which Prime did business with
ORM, which acted on behalf of Aloha Jetski.
Woods explains that he served as Aloha Jetski’s insurance broker to locate
insurers who were willing to issue liability insurance policies covering Aloha
Jetski’s operations. Woods Decl. ¶¶ 2-4. Aloha Jetski, through its owner Glenn
Cohen, always determined how much coverage it desired to purchase and how
much it was willing to pay in its dealings with Woods. Woods Decl. ¶ 5.
According to Woods, Aloha Jetski did not request nor did ORM assume any
advisory duties with respect to Aloha Jetski’s coverage minimums. Woods Decl.
¶¶ 6-7.
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Aloha Jetski had a liability insurance policy issued by Prime that was set to
expire on January 8, 2012. Woods Decl. ¶ 8. On December 7, 2011, IEBS and
UDA provided a quote for renewal of Aloha Jetski’s policy with several per person
limits up to $250,000. During the same time, Woods was obtaining quotes from
other insurance companies on behalf of Aloha Jetski. Woods Decl. ¶¶ 9-11, Ex. C.
On January 10, 2012, at the request of Aloha Jetski, Woods obtained a renewed
quote from IEBS and UDA, with a limit of liability of $100,000 per person, after
the earlier December offer expired on January 6, 2011. Woods Decl. ¶¶ 12-13, Ex.
E. On January 16, 2012, Aloha Jetski ordered a renewal of Aloha Jetski’s Prime
policy as quoted. Woods Decl. ¶ 14. On January 18, 2012, Woods emailed Aloha
Jetski’s request form to IEBS, with a requested bind date of January 18, 2012.
Woods Decl. ¶ 15, Ex. G. Prime issued Aloha Jetski the surplus lines policy
covering the period from January 18, 2012 until January 18, 2013. Woods Decl.
¶¶ 17-18; Prime Ex.8 (Policy).
In light of the conflicting record regarding which parties have rights to
enforce the Agreement, the Court finds that genuine issues of material fact
preclude summary judgment on Count I. At this time, Prime has not established as
a matter of law that it is an entity through which IEBS conducts business.
Although ORM and IEBS are signatories to the Agreement, Prime presents
25
evidence that IEBS was a sister company that provided brokerage services, and is
owned by the same parent entity, that should give Prime rights to enforce the
Agreement as an “entity through which IEBS conducts business.” Prime Ex. 4; see
also McBride Decl. ¶¶ 3-4, Ex. 9. ORM, however, presents contrary evidence
showing that IEBS was an entity through which Prime conducted business, and
therefore, that Prime is not a party to the Agreement as an entity through which
IEBS conducts business. See Woods Decl., Exs. E (Renewal Quote) & G (1/18/12
Email). Accordingly, issues of fact preclude summary judgment on this issue.
Issues of fact also persist with respect to whether ORM breached the
Agreement. For example, Prime contends that ORM failed to accept “all
responsibility to satisfy any and all obligations of taxes and fees requirement by
any state and to otherwise assure compliance with all regulatory requirements,” in
violation of Paragraph B of the Agreement. In the state court coverage litigation,
the judge indicated in a summary judgment ruling that Aloha Jetski’s Policy did
not comply with the DLNR’s permitting insurance minimums, and held that
eroding limits were against public policy and invalid. Aubuchon Decl. ¶ 6; Ex. 3
(4/4/2014 Order). Prime argues that ORM had a contractual obligation to ensure
that the Policy it procured for Aloha Jetski complied with the DLNR regulations.
In fact, Prime asserts expansively that the Agreement required ORM to assure
26
compliance with any and all regulatory requirements, without any limit
whatsoever. See Prime Reply at 6.
ORM denies breaching this provision. It contends that it has satisfied all
obligations of taxes and fees required by the State of Hawaii in connection with
Aloha Jetski’s surplus lines insurance policy, and that it complied with all
regulatory requirements applicable to the issuance of the policy, which is all that
was required of it. See Coates Decl. ¶ 4. On January 19, 2012, a certificate of
insurance was issued to the DNLR disclosing the limit of liability below the
DLNR’s regulatory requirements, and the DLNR never took any action with
respect to Aloha Jetski’s permit. Woods Decl. ¶¶ 16, 19; Ex. H. The Court agrees
that, even assuming Prime has standing to enforce the Agreement, there is a
genuine issue of material fact regarding whether ORM breached the Agreement
and whether any alleged breach damaged Prime.
Accordingly, Prime’s counter-motion for partial summary judgment on
Count I is DENIED.
III.
Summary of Rulings
Woods and ORM’s Motion to Dismiss is granted with respect to Count I
(Breach of Contract), granted in part and denied in part with respect to Count II
(Negligence), denied as to Count III (Negligent Misrepresentation), granted as to
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Count IV (Promissory Estoppel), granted as to Count V (HRS § 480-2), and
granted as to Count VI (Punitive Damages). Prime is granted leave to amend with
respect to the dismissed portions of Counts I, II, IV, and V.
Prime’s Counter-Motion for Partial Summary Judgment is denied.
CONCLUSION
For the foregoing reasons, Defendants’ motion is GRANTED IN PART and
DENIED IN PART. Prime is GRANTED until September 21, 2015 to file a
second amended complaint in accordance with this order. Prime’s Counter-Motion
for Partial Summary Judgment is DENIED.
IT IS SO ORDERED.
DATED: August 24, 2015 at Honolulu, Hawai‘i.
Prime Insurance Company vs. Offshore Risk Management et al;
Civil No. 14-00545 DKW-KSC; ORDER (1) GRANTING IN PART AND
DENYING IN PARTDEFENDANTS’ MOTION TO DISMISS FIRST
AMENDED COMPLAINT AND (2) DENYING PLAINTIFF’S COUNTERMOTION FOR PARTIAL SUMMARY JUDGMENT
28
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