State Farm Mutual Automobile Insurance Company v. Morris
ORDER GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT AGAINST DEFENDANT IAIN MORRIS, AND SUMMARY JUDGMENT AGAINST INTERVENOR-DEFENDANT LAWRENCE SCOTT BUCKNELL, AND DENYING INTERVENOR- DEFENDANT 39;S COUNTER MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM re 23 , 28 - Signed by JUDGE ALAN C KAY on 7/19/2016. "For the foregoing reasons, the Court GRANTS State Farm's Motion for Default Judgment or, in the Alt ernative, for Summary Judgment Against Defendant Iain Morris, and Summary Judgment Against Intervenor-Defendant Lawrence Scott Bucknell, and DENIES Bucknell's Counter Motion for Summary Judgment on Counterclaim. In so doing, the Court finds a s a matter of law that State Farm has no duty to defend or indemnify Morris for claims asserted against him in the underlying lawsuit." (emt, )CERTIFICATE OF SERVICEParticipants registered to recei ve 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
STATE FARM MUTUAL AUTOMOBILE
) Civ. No. 15-00511 ACK-KJM
LAWRENCE SCOTT BUCKNELL,
ORDER GRANTING PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT OR, IN
THE ALTERNATIVE, FOR SUMMARY JUDGMENT AGAINST DEFENDANT IAIN
MORRIS, AND SUMMARY JUDGMENT AGAINST INTERVENOR-DEFENDANT
LAWRENCE SCOTT BUCKNELL, AND DENYING INTERVENOR-DEFENDANT’S
COUNTER MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM
For the reasons set forth below, the Court GRANTS
Plaintiff State Farm Mutual Automobile Insurance Company’s
Motion for Default Judgment or, in the Alternative, for Summary
Judgment Against Defendant Iain Morris, and Summary Judgment
Against Intervenor-Defendant Lawrence Scott Bucknell, ECF No.
23, and DENIES Intervenor-Defendant Lawrence Scott Bucknell’s
Counter Motion for Summary Judgment on Counterclaim, ECF No. 28.
On December 11, 2015, Plaintiff State Farm Mutual
Automobile Insurance Company (“State Farm”) filed a Complaint
- 1 -
for Declaratory Judgment (“Complaint”) asking this Court for a
declaration that State Farm has no duty to defend or indemnify
Defendant Iain Morris for claims asserted against him in an
underlying lawsuit brought by Intervenor-Defendant Lawrence
Scott Bucknell, or for any other claims that may arise out of
the subject matter of the underlying lawsuit.
Complaint at 9,
ECF No. 1.
On January 22, 2016, State Farm’s counsel filed a
declaration stating that a certified copy of the Complaint had
been served on Morris by certified mail on January 19, 2016.
ECF No. 10.
Attached to the declaration was an executed receipt
ECF No. 10-1.
Morris having failed to file a
responsive pleading or otherwise defend against the Complaint,
on March 7, 2016, State Farm requested that the Clerk of Court
enter Morris’s default.
ECF No. 15.
Thus, on March 8, 2016,
the Clerk of Court filed an Entry of Default against Iain Morris
as to the Complaint for Declaratory Judgment.
ECF No. 16.
Meanwhile, on February 22, 2016, the Court approved a
stipulation between State Farm and Bucknell permitting Bucknell
to intervene in this case as a defendant.
ECF No. 11.
thereafter filed an Answer to State Farm’s Complaint on March
ECF No. 20.
Additionally, Bucknell filed a
Counterclaim for Declaratory Relief (“Counterclaim”) requesting
this Court to declare that State Farm must indemnify Morris for
- 2 -
the claims asserted against him in the underlying lawsuit and
any other claims that may arise out of the same.
ECF No. 20-1
State Farm filed an Answer to Bucknell’s Counterclaim
on April 12, 2016.
ECF No. 22.
On April 26, 2016, State Farm filed its Motion for
Default Judgment or, in the Alternative, for Summary Judgment
Against Defendant Iain Morris, and Summary Judgment Against
Intervenor-Defendant Lawrence Scott Bucknell, along with a
Memorandum in Support of Motion (“Pl.’s Mot.”).
State Farm also
filed a Concise Statement of Facts in Support of its Motion
ECF No. 24.
State Farm argues that it is
entitled to default judgment against Morris due to Morris’s
failure to plead in response to or otherwise defend against the
Pl.’s Mot. at 1.
Alternatively, State Farm argues
that summary judgment is appropriate against Morris because
Morris does not qualify as an “insured” under the subject car
insurance policy for any of the claims asserted against him in
the underlying lawsuit.
Id. at 1-2.
Consequently, State Farm
asserts that the Court should grant summary judgment in its
favor as to Bucknell because State Farm owes no duty to
indemnify Morris for claims asserted against him by Bucknell in
the underlying lawsuit.
Id. at 2.
On June 27, 2016, Bucknell filed an Opposition to
State Farm’s Motion and a Counter Motion for Summary Judgment on
- 3 -
Counterclaim, along with a Combined Memorandum in support
thereof (“Def.’s MSJ”).1
Bucknell also filed a Separate and
Concise Statement of Facts in Support of his Motion and in
Opposition to State Farm’s Motion (“Def.’s CSF”).2
argues that State Farm’s policy is inconsistent with Hawaii law,
public policy, and the reasonable expectations of laypersons,
and that the Court should therefore deny State Farm’s Motion for
Summary Judgment and declare that State Farm is obligated to
defend and indemnify Morris in the underlying lawsuit.
MSJ at 3-4, 13.
On July 1, 2016, State Farm filed a combined Reply in
support of its Motion and Opposition to Bucknell’s Counter
Motion (“Pl.’s Reply”).
ECF No. 31.
Bucknell filed a Reply in
support of his Counter Motion (“Def.’s Reply”) on July 11, 2016.
ECF No. 34.
The Court held a hearing regarding the Motions on July
Bucknell states that he does not dispute State Farm’s
description of the factual and procedural background of this
case. Def.’s MSJ at 4. He also incorporates State Farm’s CSF
into his memorandum by reference. Id.
Bucknell states that he accepts the facts as set forth in State
Farm’s CSF and incorporates the exhibits attached to State
Farm’s CSF into his own CSF by reference. Def.’s CSF at 2-3.
Bucknell does not state any further material facts in his CSF.
- 4 -
The Underlying Lawsuit
On December 2, 2013, Bucknell filed a complaint
against Morris in the Circuit Court of the First Circuit, State
of Hawaii for injuries Bucknell allegedly sustained when a
rental car Morris was driving collided with Bucknell’s
Pl.’s CSF ¶ 1; Bucknell v. Morris, Civil No. 13-1-
3140-12 VLC, Circuit Court of the First Circuit, State of
Hawaii, Decl. of Counsel Ex. A, ECF No. 24-2.
The complaint alleges that on July 22, 2013, Morris
was driving a rental car in the eastbound lane of Kamehameha
Highway when he attempted to execute a left turn into a parking
area just as Bucknell was approaching from the opposite
direction on his motorcycle.
Decl. of Counsel Ex. A ¶¶ 6-10.
The complaint states that Morris, in failing to yield the
right-of-way to Bucknell, caused the vehicles to collide,
resulting in “serious and permanent injuries to [Bucknell],
including but not limited to head injury, spinal injury,
internal injuries, lower leg paralysis, multiple abrasions,
contusion, and lacerations.”
Id. ¶¶ 11-13.
that, as a result, he has incurred medical and therapeutic
expenses in excess of $522,595.50, which expenses continue to
Id. ¶ 14.
- 5 -
The complaint alleges two causes of action:
negligence and 2) punitive damages.
Id. ¶ 2.
for special, general, and punitive damages, as well as
prejudgment interest from July 22, 2013 until judgment is
entered, attorney’s fees and costs, and such other relief as the
court deems just and equitable.
Id. ¶ 4.
State Farm is currently providing a defense to Morris
in the underlying lawsuit subject to a full reservation of
Pl.’s CSF ¶ 12.
The Rental Transaction
Morris entered into a rental agreement with Advantage
Rent A Car (“Advantage”) for the rental of a 2012 Toyota Corolla
on June 11, 2013.
Id. ¶ 5.
On July 22, 2013 – the date of the
collision – Morris had been in possession of the rental car for
41 consecutive days.
Id. ¶ 6.
On the rental agreement Morris listed a home/business
address in Hollister, California.
Id. ¶ 7.
Morris resides in Colorado Springs, Colorado.
Id. ¶ 7.
State Farm’s Insurance Policy
William G. Morris and Judith A. Morris are listed as
the named insureds on a State Farm Car Policy, Policy No. 147
0655-C17-06D (the “Policy”).
at 2, ECF No. 24-10.
Id. ¶ 10; Decl. of Counsel Ex. H
William G. Morris and Judith A. Morris are
Defendant Morris’s parents.
See Complaint ¶ 17; Def.’s MSJ at
- 6 -
The Policy is written on Colorado Policy Form 9806B and
insures a 2009 Subaru Outback.
Pl.’s Mot. at 4.
The Policy states that State Farm “will pay damages an
insured becomes legally liable to pay because of . . . bodily
injury to others . . . caused by an accident that involves a
vehicle for which that insured is provided Liability Coverage by
Policy at 7.
Relevant here, an “insured” is
defined in the Policy to include “resident relatives” for “the
maintenance or use of . . . a non-owned car or . . . a
temporary substitute car.”
Id. at 6.
The Policy further
Non-Owned Car means a car that is in the
lawful possession of you or any resident
relative and that neither:
1. is owned by:
b. any resident relative;
primarily in your household; or
d. an employer of any person described
in a., b., or c. above; nor
2. has been operated by, rented by, or in the
a. you; or
b. any resident relative
- 7 -
during any part of each of the 31 or more
consecutive days immediately prior to the
date of the accident or loss.
. . . .
Temporary Substitute Car means a car that is
in the lawful possession of the person
operating it and that:
1. replaces your car for a short time while
your car is out of use due to its:
d. damage; or
e. theft; and
2. neither you nor the person operating it
own or have registered.
If a car qualifies as both a non-owned car
and a temporary substitute car, then it is
considered a temporary substitute car only.
. . . .
you, who resides
person shown as
means a person, other than
primarily with the first
a named insured on the
and who is:
1. related to that named insured or his or
unemancipated child of either who is away
at school and otherwise maintains his or
her primary residence with that named
- 8 -
2. a ward or a foster child of that named
insured, his or her spouse, or a person
described in 1. above.
Id. at 4-5.
Advantage Rent A Car Insurance
Advantage had an insurance policy covering Morris’s
Pl.’s CSF ¶ 13.
It has tendered the policy’s
$20,000 bodily injury limit to Bucknell.
Id.; Pl.’s Mot. at 2
n.1; Def.’s MSJ at 11.
Securing a default judgment pursuant to Federal Rule
of Civil Procedure 55 is a two-step process.
See Eitel v.
McCool, 782 F.2d 1470, 1471 (9th Cir. 1986).
First, “[w]hen a
party against whom a judgment for affirmative relief is sought
has failed to plead or otherwise defend, and that failure is
shown by affidavit or otherwise, the clerk must enter the
Fed. R. Civ. P. 55(a).
After default has been entered, a party may then apply
to the court for entry of a default judgment.
Entry of default judgment is an issue within the
trial court’s discretion.
(9th Cir. 1980).
Aldabe v. Aldabe, 616 F.2d 1089, 1092
Courts start with “the general rule that
default judgments are ordinarily disfavored.”
See Fed. R. Civ.
Eitel, 782 F.2d
The Ninth Circuit has enumerated a list of factors
- 9 -
that courts may consider in determining whether to enter default
(1) the possibility of prejudice to the
plaintiff; (2) the merits of plaintiff's
substantive claim; (3) the sufficiency of
the complaint; (4) the sum of money at stake
in the action; (5) the possibility of a
whether the default was due to excusable
Procedure favoring decisions on the merits.
Id. at 1471-72.
Upon entry of default, “the factual allegations of the
complaint, except those relating to the amount of damages, will
be taken as true.”
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d
915, 917-18 (9th Cir. 1987) (quoting Geddes v. United Fin. Grp.,
559 F.2d 557, 560 (9th Cir. 1977)); see also Fed. R. Civ. P.
8(b)(6) (“An allegation – other than one relating to the amount
of damages – is admitted if a responsive pleading is required
and the allegation is not denied.”).
However, it is still
incumbent on the plaintiff to establish that it is entitled to
the relief which it seeks.
See Cripps v. Life Ins. Co. of N.
Am., 980 F.2d 1261, 1267 (9th Cir. 1992).
not contained in the pleadings, and claims which are legally
insufficient, are not established by default.”
- 10 -
Summary judgment is proper where there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law.
Fed. R. Civ. P. 56(a).
mandates summary judgment “against a party who fails to make a
showing sufficient to establish the existence of an element
essential to the party’s case, and on which that party will bear
the burden of proof at trial.”
Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); see also Broussard v. Univ. of Cal. at
Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
“A party seeking summary judgment bears the initial
burden of informing the court of the basis for its motion and of
identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
Soremekun v. Thrifty Payless, Inc., 509 F.3d
978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323); see
also Jespersen v. Harrah’s Operating Co., 392 F.3d 1076, 1079
(9th Cir. 2004).
“When the moving party has carried its burden
under Rule 56 [(a)] its opponent must do more than simply show
that there is some metaphysical doubt as to the material facts
[and] come forward with specific facts showing that there is a
genuine issue for trial.”
Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 586–87 (1986) (citation and internal
quotation marks omitted); see also Anderson v. Liberty Lobby,
- 11 -
Inc., 477 U.S. 242, 247–48 (1986) (stating that a party cannot
“rest upon the mere allegations or denials of his pleading” in
opposing summary judgment).
“An issue is ‘genuine’ only if there is a sufficient
evidentiary basis on which a reasonable fact finder could find
for the nonmoving party, and a dispute is ‘material’ only if it
could affect the outcome of the suit under the governing law.”
In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing
Anderson, 477 U.S. at 248).
When considering the evidence on a
motion for summary judgment, the court must draw all reasonable
inferences on behalf of the nonmoving party.
Indus. Co., 475 U.S. at 587; see also Posey v. Lake Pend Oreille
Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating
that “the evidence of [the nonmovant] is to be believed, and all
justifiable inferences are to be drawn in his favor”).
“In insurance disputes, the insurer is only required
to establish the absence of a genuine issue of material fact
regarding the question of coverage pursuant to the plain
language of the insurance policies and the consequent
entitlement to the entry of judgment as a matter of law.”
Burlington Ins. Co. v. United Coatings Mfg. Co., 518 F. Supp. 2d
1241, 1246 (D. Haw. 2007) (internal quotation marks and citation
- 12 -
The court has diversity jurisdiction to hear this case
pursuant to 28 U.S.C. § 1332.
State Farm is an Illinois
corporation, Morris is a resident of either California or
Colorado, and Bucknell is a resident of Hawaii.
1-2; Counterclaim ¶ 1-3.
Federal courts sitting in diversity
apply state substantive law and federal procedural law.
v. Plumer, 380 U.S. 460, 465 (1965); Erie v. Tompkins, 304 U.S.
64, 78 (1938).
A federal court is bound by the decisions of a
state’s highest court when interpreting state law.
Power Coop., Inc. v. Berkeley, 59 F.3d 988, 991 (9th Cir. 1995).
However, “[i]n the absence of such a decision, a federal court
must predict how the highest state court would decide the issue
using intermediate appellate court decisions, decisions from
other jurisdictions, statutes, treatises, and restatements as
Framework for Construing Insurance Contracts
Under Hawaii law, courts look to the plain language of
the insurance policy to determine the scope of the insurer’s
Dairy Rd. Partners v. Island Ins. Co., Ltd., 92 Haw.
398, 411 (2000); Burlington Ins. Co. v. Oceanic Design & Const.
Inc., 383 F.3d 940, 945 (9th Cir. 2004) (“In Hawaii, the terms
of an insurance policy are to be interpreted according to their
- 13 -
plain, ordinary, and accepted sense in common speech.”); see
also Haw. Rev. Stat. § 431:10-237 (“Every insurance contract
shall be construed according to the entirety of its terms and
conditions as set forth in the policy, and as amplified,
extended, restricted, or modified by any rider, endorsement or
application attached to and made a part of the policy.”).
“In the context of insurance coverage disputes, [the
court] must look to the language of the insurance policies
themselves to ascertain whether coverage exists, consistent with
the insurer and insured’s intent and expectations.”
Ins. & Guar. Co. v. Fin. Sec. Ins. Co., 72 Haw. 80, 87 (1991).
At the same time, insurance policies must be “in accordance with
the reasonable expectations of a layperson.”
Adventures, Inc. v. N. Am. Capacity Ins. Co., 623 F. Supp. 2d
1189, 1194 (D. Haw. 2009).
“[B]ecause insurance contracts are
contracts of adhesion, they must be construed liberally in favor
of the insured, and any ambiguity must be resolved against the
A contract term is considered ambiguous only if
it is “capable of being reasonably understood in more ways than
Cho Mark Oriental Food, Ltd. v. K & K Int’l, 73 Haw. 509,
“[T]he parties’ disagreement as to the meaning of a
contract or its terms does not render clear language ambiguous.”
State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Haw. 315,
- 14 -
Finally, “insurers have the same rights as individuals
to limit their liability and to impose whatever conditions they
please on their obligation, provided they are not in
contravention of statutory inhibitions or public policy.”
Rd. Partners, 92 Haw. at 411 (quoting First Ins. Co. of Haw.,
Inc. v. State, 66 Haw. 413, 423 (1983)) (brackets omitted).
a. Duty to Defend
The duty to defend under Hawaii insurance law is
broad, and “arises wherever there is the mere potential for
Commerce & Indus. Ins. Co. v. Bank of Haw., 73 Haw.
322, 326 (1992).
Hawaii abides by the “complaint allegation
rule,” whereby the determination of whether an insurer has a
duty to defend focuses on the claims and facts that are alleged.
Burlington, 383 F.3d at 944.
Thus, “[t]he duty to defend ‘is
limited to situations where the pleadings have alleged claims
for relief which fall within the terms for coverage of the
Id. (quoting Hawaiian Holiday Macadamia
Nut Co. v. Indus. Indem. Co., 76 Haw. 166, 169 (1994)).
pleadings fail to allege any basis for recovery within the
coverage clause, the insurer has no obligation to defend.”
Hawaiian Holiday, 76 Haw. at 169 (quotation marks and citation
As the Hawaii Supreme Court has explained:
The obligation to defend is broader than the
duty to pay claims and arises wherever there
is the mere potential for coverage.
- 15 -
other words, the 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.
Tri-S Corp. v. W. World Ins. Co., 110 Haw. 473, 488 (2006)
(emphasis in original); see also Burlington, 383 F.3d at 944
(“The duty to defend exists irrespective of whether the insurer
is ultimately found not liable to the insured and is based on
the possibility for coverage, even if remote, determined at the
time suit is filed.”).
On a motion for summary judgment regarding its duty to
defend, the insurer bears the burden of proving there is “no
genuine issue of material fact with respect to whether a
possibility exists that the insured would incur liability for a
claim covered by the policy.”
Tri-S, 110 Haw. at 488 (brackets
omitted, emphasis in original).
The insured’s burden, on the
other hand, “is comparatively light, because it has merely to
prove that a possibility of coverage exists.”
omitted, emphasis in original).
b. Duty to Indemnify
The insurer owes a duty to indemnify the insured “for
any loss or injury which comes within the coverage provisions of
the policy, provided it is not removed from coverage by a policy
State Farm Fire & Cas. Co. v. Cabalis, 80 F. Supp.
- 16 -
3d 1116, 1122 (D. Haw. 2015) (quoting Dairy Rd. Partners, 92
Haw. at 413).
On a motion for summary judgment regarding the
issue of whether it has a duty to indemnify the insured, the
insurer is “not required to disprove any possibility that its
insured might be liable for a claim asserted in the underlying
Dairy Rd. Partners, 92 Haw. at 413 (emphasis in
Here, the insurer must only “establish the absence
of a genuine issue of material fact regarding the question of
coverage pursuant to the plain language of the insurance
policies and the consequent entitlement to the entry of judgment
as a matter of law.”
Based upon a consideration of the Eitel factors, the
Court finds that State Farm is entitled to default judgment
against Morris and discusses each factor in turn.
a. Possibility of Prejudice to State Farm
State Farm will suffer prejudice if default judgment
is not entered against Morris.
State Farm is currently
defending Morris in the underlying lawsuit pursuant to a
reservation of rights, and is entitled to a determination
whether it in fact owes a duty to defend or indemnify Morris for
This factor therefore weighs in favor of default
- 17 -
b. Merits of State Farm’s Substantive Claim
Under the terms of the Policy, State Farm has agreed
to “pay damages an insured becomes legally liable to pay because
of . . . bodily injury to others . . . caused by an accident
that involves a vehicle for which that insured is provided
Liability Coverage . . . .”
Policy at 7.
An “insured” includes
a “resident relative” for whom coverage will be provided for the
“maintenance or use of . . . a non-owned car; or . . . a
temporary substitute car.”
Id. at 6.
The “non-owned car” provision in the Policy requires
that the vehicle at issue not have been “operated by, rented by,
or in the possession of . . . any resident relative during any
part of each of the 31 or more consecutive days immediately
prior to the date of the accident or loss.”
Id. at 5.
Complaint alleges that Morris rented the car on June 11, 2013
and that the accident occurred on July 22, 2013, meaning that
Morris had been in possession of the vehicle for 41 consecutive
days when the accident occurred.
Complaint ¶¶ 9, 11.
based on the allegations in the Complaint, Morris is not
entitled to coverage under the “non-owned car” provision of the
Policy because he had possession of the vehicle for each of the
31 or more days prior to the accident.
Next, a “temporary substitute car” is defined in the
Policy as a car that “replaces your car for a short time while
- 18 -
your car is out of use due to its:
a. breakdown; b. repair; c.
servicing; d. damage; or e. theft . . . .”
Policy at 5.
car” is defined as the vehicle listed on the Policy’s
declarations page, which in this case is a 2009 Subaru Outback.
See Policy at 6; Decl. of Counsel Ex. H at 2.
claims that Morris’s use of the rental car does not qualify as a
“temporary substitute car,” and there is no indication in any of
the filings in this case that Morris rented the car to replace
the 2009 Subaru Outback for any of the reasons delineated in the
Morris is therefore not covered under the “temporary
substitute car” provision of the Policy, based on the
allegations in the Complaint.
The Court finds meritorious State Farm’s claim that
Morris does not qualify as an “insured” under the Policy, and
this factor thus weighs in favor of default judgment.
c. Sufficiency of the Complaint
This factor weighs in favor of default judgment.
allegations of the Complaint are sufficiently pled and are
supported by facts in the record.
d. Sum of Money at Stake
The sum of money at stake favors default judgment.
damages are sought in this action; rather, State Farm seeks a
declaration as to the rights of the parties under the Policy at
- 19 -
e. Possibility of Dispute Concerning Material
Here there is little possibility of dispute concerning
the facts material to this action.
The issue of whether Morris
is entitled to a defense or indemnification from State Farm may
be determined by comparing the coverage afforded by the Policy
to the allegations in the underlying lawsuit.
This factor also
weighs in favor of default judgment.
f. Whether Default Was Due to Excusable Neglect
The Court finds that Morris’s default was not due to
State Farm served Morris with a copy of the
Complaint on January 19, 2016 and obtained an executed receipt
ECF No. 10-1.
Both State Farm and Bucknell have
continued to serve copies of their filings on Morris, including
copies of State Farm’s initial request to the Clerk of Court for
an entry of default and the instant Motions.
Morris has so far
made no appearance, has made no motion to set aside the Entry of
Default, and has filed no opposition to State Farm’s instant
Morris’s default appears to stem from his own willful
decision not to participate in the instant litigation.
factor therefore weighs in favor of default judgment.
g. Policy Favoring Decision on the Merits
While the court recognizes the strong policy favoring
resolution of cases on the merits, further proceedings as to
- 20 -
Morris at this juncture would be futile given his failure to
participate in the instant litigation.
Further, State Farm’s
request for declaratory relief requires that this Court construe
as a matter of law whether or not Morris is entitled to
coverage, which entails comparing the language of the Policy at
issue to the allegations in the underlying lawsuit.
discussed above, the merits of State Farm’s claims weigh in
favor of a finding that State Farm has no duty to defend or
indemnify Morris for the claims asserted in the underlying
Therefore, the policy favoring decision of cases on
the merits does not offset the other factors weighing in favor
of default judgment.
Weighing all of the Eitel factors together, the Court
finds that State Farm is entitled to default judgment against
The Court therefore GRANTS State Farm’s Motion to the
extent it seeks the same.
The Court next turns to State Farm’s Motion for
Summary Judgment against Bucknell.
Importantly, a finding of
default judgment against Morris does not require that a finding
of summary judgment against Bucknell follow.
entitled to defend against State Farm’s declaratory judgment
action on the merits, and the Court will not construe as true
the well-pleaded factual allegations in the Complaint as to
- 21 -
See Westchester Fire Ins. Co. v. Mendez, 585 F.3d
1183, 1189 (9th Cir. 2009) (“A default entered against an
insured policyholder . . . should not prevent an injured third
party . . . from proceeding on its own behalf.
The argument for
permitting another party to proceed is especially powerful in
the context of third-party liability insurance, where the
insured may lose interest and the injured party has the primary
motivation to pursue the claim.”).
“[W]here there are several
defendants, the transgressions of one defaulting party should
not ordinarily lead to the entry of a final judgment, let alone
a judgment fatal to the interests of other parties.”
a. Whether Morris is an “Insured” Under the
Terms of the Policy
State Farm contends it is entitled to summary judgment
because Morris does not qualify as an “insured” under the terms
of the Policy.
Pl.’s Mot. at 11.
As in its argument regarding
default judgment, State Farm asserts that Morris does not
qualify for coverage because he is not a “resident relative” who
used a “non-owned car” or “temporary substitute car.”
i. “Non-Owned Car” Provision
Again, for a vehicle to qualify as a “non-owned car”
under the Policy, it must not have been “operated by, rented by,
or in the possession of . . . any resident relative during any
part of each of the 31 or more consecutive days immediately
- 22 -
prior to the date of the accident or loss.”
Policy at 5.
Farm argues that because Morris had possessed the rental car for
41 days on the date of the accident he is not entitled to
Pl.’s Mot. at 12-13.
Bucknell does not appear to dispute that the provision
on its face precludes coverage for the accident.
Bucknell agrees with and incorporates into his own memorandum
State Farm’s version of the facts, including the fact that
Morris had possessed the rental car for 41 days at the time of
See Def.’s MSJ at 4; Pl.’s Mot. at 4.
Bucknell argues that the Policy’s “non-owned car” provision
conflicts with Hawaii law, is contrary to public policy, and
does not comport with the reasonable expectations of laypersons.
See Def.’s MSJ at 5-13.
1. Whether the Provision Conflicts
with Hawaii Law
Bucknell contends the Policy conflicts with two Hawaii
statutes that, when read together, require State Farm to provide
liability insurance for rental cars for a period up to six
Def.’s MSJ at 5-10.
Bucknell cites to Hawaii Revised
Statute (“HRS”) § 287-26, which states:
A driver’s policy of liability insurance
shall insure the person named as insured
therein against loss from the liability
imposed upon the person by law for damages
arising out of the use by the person of any
motor vehicle not owned by the person,
- 23 -
within the same territorial limits and
subject to the same limits of liability as
are set forth above with respect to an
owner's policy of liability insurance.
Noting that rental cars are considered “U-drive motor vehicles”
under Hawaii motor vehicle insurance law, Bucknell also cites to
HRS § 431:10C-103 for the following definitions:
vehicle which is rented or leased or offered
for rent or lease to a customer from an
operator of a U-drive rental business.
“U-drive rental business” means the business
of renting or leasing to a customer a motor
vehicle for a period of six months or less
notwithstanding the terms of the rental or
lease if in fact the motor vehicle is rented
or leased for a period of six months or
Reading these statutes together, Bucknell argues that because
Hawaii law will recognize a car as a rental vehicle for up to
six months, a liability insurance provider must provide coverage
for rental cars for no less than six months.
Def.’s MSJ at 9.
State Farm counters Bucknell’s argument first by
pointing out that HRS § 287-26 is a “financial responsibility”
statute that sets out requirements for drivers, rather than an
insurance statute that outlines the type of coverage required
for an insured vehicle.
Pl.’s Reply at 4.
Further, State Farm asserts, HRS § 287-26 does not
prescribe the extent of coverage that must be afforded to
drivers of non-owned cars, and the fact that HRS § 431:10C-103
- 24 -
states that a car may be considered a rental vehicle for up to
six months does not require that insurers provide coverage for
this amount of time.
Id. at 6-7.
State Farm instead points to
HRS § 431:10C-301(a)(2), which states that “[a]n insurance
policy covering a motor vehicle shall provide . . . in the case
of a U-drive motor vehicle, insurance to pay on behalf of the
renter . . . sums which the renter or operator may be legally
obligated to pay for damage or destruction of property of others
. . . arising out of the operation or use of the motor vehicle.”
The statute further provides that a motor vehicle insurance
policy must include liability coverage of at least $20,000 per
person, with an aggregate limit of $40,000 per accident.
As the parties both agree, Morris purchased
an insurance policy from Advantage that included the statutorily
required minimum, which has already been tendered to Bucknell.
Pl.’s CSF ¶ 13.
Bucknell seems to concede that Advantage’s policy met
the statutorily required minimum, but argues that Morris’s State
Farm Policy is required to insure Morris for the accident as
Def.’s Reply at 5.
However, there is no statute
requiring that a driver possess insurance coverage beyond the
Furthermore, the State Farm Policy does
provide coverage for “non-owned cars” such as rental cars; it
has simply chosen to limit that liability by imposing a 31-day
- 25 -
time limitation on its “non-owned car” provision, as is its
See Dairy Rd. Partners, 92 Haw. at 411 (quoting First
Ins. Co. of Haw., 66 Haw. at 423) (“[I]nsurers have the same
rights as individuals to limit their liability and to impose
whatever conditions they please on their obligation, provided
they are not in contravention of statutory inhibitions or public
policy.”) (brackets omitted).
Bucknell also disregards the fact that the Morris’s
Policy was written using a Colorado policy form and in
accordance with Colorado law.
See Pl.’s Mot. at 4; Decl. of
Counsel Ex. H at 2; Policy at 41.
Clearly, it would be
impractical for State Farm to issue policies in one state that
complied with the laws of each of the other 49 states.
anything, the more appropriate inquiry would look into whether
the Policy comports with Colorado law – but Bucknell does not
raise this argument.
Furthermore, as has already been
discussed, Morris purchased an insurance policy for the rental
car from Advantage that satisfied the statutorily required
Turning now to the “non-owned car” provision itself,
State Farm contends that the provision complies with Chapter 431
of the Hawaii Revised Statutes, and that a similar provision has
been upheld by the Hawaii Intermediate Court of Appeals (“ICA”).
Pl.’s Mot. at 13-14, 21-22; see also Crawley v. State Farm Mut.
- 26 -
Ins. Co., 90 Haw. 478 (Ct. App. 1999).
State Farm argues that
Crawley stands for the proposition that a car does not qualify
as a “non-owned car” for insurance coverage purposes when it is
driven longer than the time limitation provided in the
Pl.’s Mot. at 13.
Bucknell argues that Crawley is
inapplicable because the case did not involve a rental car, did
not address what Bucknell calls the “regular use doctrine,” and
did not discuss the scope of HRS § 287-26.
Def.’s MSJ at 8.
In Crawley, seventeen-year-old Michelle Delacruz was
involved in a car accident that injured several passengers in
Crawley, 90 Haw. at 479.
Delacruz resided with
her father and was driving his car at the time of the accident.
Id. at 479-80.
Plaintiff-appellants thereafter made a demand on
Delacruz’s mother’s insurance provider for coverage of their
personal injury claims, claiming that the provider was required
to extend coverage under the policy’s “non-owned car” provision.
Id. at 480-481.
The court ultimately decided that because
Delacruz did not live with her mother she did not qualify as an
“insured” under the policy, and that the “non-owned car”
provision therefore did not impose a duty on the insurer to
Id. at 487.
The court then stated in dicta that even if Delacruz
were an “insured” under the policy, the insurer would not be
required to provide coverage under the “non-owned car”
- 27 -
Id. at 487.
The provision stated that a “car which
has been operated . . . or in the possession of an
insured during any part of each of the last [twenty-one] or more
consecutive days” was not a “non-owned car.”
brackets in original).
Id. (emphasis and
Because Delacruz had “daily use” of the
car for at least twenty-one days prior to the accident, the
court concluded that the vehicle would not qualify as a “nonowned car” for coverage purposes.
The court explained, “An
exclusion such as the twenty-one-day clause is intended to
prevent the insured from obtaining coverage on a regularly
available vehicle without paying a premium.”
marks and brackets omitted).
Bucknell seizes on this “regularly available” language
to argue that Crawley denied coverage under what Bucknell calls
the “regular use doctrine,” which states that a vehicle that is
regularly used is not entitled to coverage under a “non-owned
Def.’s MSJ at 6-7.
Because, as Bucknell puts
it, “renting a car is an infrequent and casual use of an
undescribed automobile,” rental cars are not subject to the
“regular use doctrine” and therefore may not be excluded from
coverage under limitations in “non-owned car” provisions.
However, the court made very clear that it was because
Delacruz had daily use of the car “for at least [twenty-one]
consecutive days prior to the accident” that coverage would be
- 28 -
precluded if she was an “insured.”
Crawley 90 Haw. at 487.
inquiry thus focused on the time limitation, which, according to
the court, was the mechanism the insurer had chosen in order to
define what constituted a “regularly available vehicle.”
In support of his argument regarding the “regular use
doctrine,” Bucknell cites to cases in several other
jurisdictions for the proposition that “[a] rental car is not
considered a car made available for regular use.”
7 (emphasis in original).
Def.’s MSJ at
However, in the cases Bucknell cites,
the relevant provisions differed from the instant “non-owned
car” provision in an important way – they lacked a time
limitation that barred coverage beyond a certain number of days.
In a case before the Idaho Supreme Court, the relevant provision
defined “non-owned car” as a car that was not “furnished or
available for . . . regular or frequent use.”
State Farm Mut.
Auto. Ins. Co. v. Robinson, 926 P.2d 631, 636 (Idaho 1996).
a case before the West Virginia Supreme Court, an exclusion
stated that the insurer would not provide coverage for any
vehicle, other than “your covered vehicle,” which was “furnished
or available for your regular use.”
Am. States Ins. Co. v.
Tanner, 563 S.E.2d 825, 828 (W. Va. 2002).
Thus, Bucknell’s argument regarding “regular use”
misses the point.
There is not a “regular use doctrine” in
insurance law that defines when a car is to be considered a
- 29 -
“non-owned car” for coverage purposes.
Rather, “regular use” is
a benchmark used in some insurance policies to determine whether
or not a car will be considered a “non-owned car” under the
terms of that specific policy.
Such provisions operate similar
to how a time limitation operates in the “non-owned car”
provisions in other policies, including the one at issue here.
Ultimately, the 31-day time limitation is the
mechanism by which State Farm has chosen to limit its liability
on “non-owned cars.”
As noted above, insurance companies are
entitled to limit their liability, so long as they do so in
accordance with law and public policy.
While the ICA expressed
only in dicta its approval of a “non-owned car” provision
containing a time limitation, the Court gleans from its
statement that such provisions are in accordance with Hawaii
See Ariz. Elec., 59 F.3d at 991 (“In the absence of . . .
a decision, a federal court must predict how the highest state
court would decide the issue . . . .”).
For the foregoing reasons, the Court FINDS that the
Policy’s “non-owned car” provision does not conflict with Hawaii
2. Whether the Provision is Contrary
to Public Policy
Bucknell next argues that limiting coverage for rental
cars to 31 days is contrary to public policy.
- 30 -
Def.’s MSJ at
Bucknell maintains that Hawaii public policy “strongly
favors non-owned car coverage,” as evidenced by HRS § 287-26,
and that non-owned car coverage is particularly crucial in
Hawaii because it is a “travel hub” for tourists.
Id. at 10.
Bucknell further states that the 31-day limitation on coverage
is arbitrary, and that “providing financial protection to
insureds and injured persons significantly outweighs State
Farm’s interest in artificially capping the length of rental
Id. at 11.
He also contends that when an insured
individual rents a car, the insured car often remains at home,
meaning that the insurer’s underwriting risk is not materially
affected by also covering the rental car.
The Court is not persuaded by Bucknell’s arguments.
For one, the fact that the Policy complies with Hawaii law cuts
against Bucknell’s contention that it offends public policy.
See Anderson v. State Farm Ins. Co., 300 F. App’x 470, 471 (9th
Cir. 2008) (finding that an insurance policy’s exclusions did
not offend public policy when the exclusions were consistent
with state statutory law and the purpose behind the exclusions).
Furthermore, the ICA has expressed a policy reason in favor of
the limitations contained in “non-owned car” provisions.
Crawley court explained, “An exclusion such as the twenty-oneday clause is intended to prevent the insured from obtaining
coverage on a regularly available vehicle without paying a
- 31 -
Crawley, 90 Haw. at 487 (quotation marks and brackets
Thus, the Court disagrees with Bucknell that the
31-day time limitation is arbitrary.
Rather, it represents a
decision by State Farm to discontinue coverage for a non-owned
vehicle after an insured has been in possession of that vehicle
for approximately one month, in order to avoid a situation where
the insured is effectively able to obtain long-term coverage on
a car for which he has not paid a premium.
Bucknell notes that while it is true that Advantage
has tendered the statutorily required minimum amount to
Bucknell, the $20,000 he received constitutes “meaningless
Def.’s MSJ at 11.
Indeed, Bucknell is
paralyzed and has medical bills in excess of $500,000.
Decl. of Counsel Ex. A ¶ 14.
The Court understands Bucknell’s
frustration and recognizes that the terms of the Policy place
him in a particularly unfortunate situation.
“non-owned car” provision does not offend public policy and the
Court must construe it as written.
For the foregoing reasons, the Court FINDS that the
“non-owned car” provision is not contrary to public policy.
3. Whether the Provision Comports
with the Reasonable Expectations
Finally, Bucknell argues that the Policy does not
comport with the reasonable expectations of laypersons, because
- 32 -
“[m]ost Hawaii consumers reasonably expect that their personal
insurance will follow them while they are driving a rental car,
no matter how long the rental period.”
Def.’s MSJ at 12.
However, as State Farm points out, the Hawaii Supreme
Court has stated that the reasonable expectations of laypersons
“are derived from the insurance policy itself, which is subject
to the general rules of contract construction.”
Del Monte Fresh
Produce (Haw.), Inc. v. Fireman’s Fund Ins. Co., 117 Haw. 357,
368 (2007) (internal quotation marks omitted).
construing the policy according to the entirety of its terms and
conditions, and the terms themselves . . . should be interpreted
according to their plain, ordinary, and accepted sense in common
speech unless it appears from the policy that a different
meaning was intended.”
Id. (quotation marks and brackets
Importantly, a court must honor these reasonable
expectations even when “painstaking study of the policy
provisions would have negated those expectations.”
Here, Bucknell does not argue that the “non-owned car”
provision is ambiguous.
Indeed, the provision plainly states
that a vehicle will not be considered a “non-owned car” for
coverage purposes when it has been operated, rented, or
possessed by a “resident relative” for each of the 31 or more
consecutive days immediately prior to the accident.
language is clear and unambiguous, and thus a layperson would be
- 33 -
expected to construe the provision to mean that after 30 days of
possessing a rental car, he would no longer receive coverage for
the vehicle under the “non-owned car” provision.
For the foregoing reasons, the Court FINDS that the
Policy’s “non-owned car” provision comports with the reasonable
expectations of laypersons.
Because the “non-owned car” provision comports with
Hawaii law, public policy, and the reasonable expectations of
laypersons, the Court FINDS that the provision is valid and that
its 31-day time limitation precludes coverage for Morris’s
As noted above, the Morris’s Policy was written in accordance
with Colorado law. See Decl. of Counsel Ex. H at 2; Policy at
41. Further, the Policy states, “Without regard to choice of
law rules, the law of the state of . . . Colorado will control
. . . in the event of any disagreement as to the interpretation
and application of any provision in this policy . . . .” Policy
at 41. Although neither party has raised the issue of which law
governs the Court’s analysis and both parties make their
arguments with reference to Hawaii law, the Court finds that the
State Farm Policy and the “non-owned car” provision comport with
Colorado law, in addition to Hawaii law. In accordance with
Colorado Revised Statute § 10-4-620, which requires that an
automobile insurance policy include liability coverage of at
least $25,000 per person, $50,000 per accident, and $15,000 for
property damage, the Policy at issue provides $100,000 per
person, $300,000 per accident, and $100,000 for property damage.
See Decl. of Counsel Ex. H at 2. The Policy thus provides
Colorado’s required statutory minimums.
Additionally, under Colorado law, “An insurer may impose
any terms and conditions consistent with public policy as it
sees fit . . . . However, any terms or provisions of an
insurance contract that attempt to dilute, condition, or limit
statutorily mandated coverage violate public policy.” Christian
v. State Farm Mut. Auto. Ins. Co., 962 P.2d 310, 312 (Colo. App.
- 34 -
ii. “Temporary Substitute Car” Provision
As noted above, a “temporary substitute car” is a car
that “replaces your car for a short time while your car is out
1997). With respect to “non-owned car” provisions, the Colorado
Court of Appeals has explained that “[t]he purpose of a nonownership clause . . . is to provide the insured with coverage
while the insured is engaged in the occasional or infrequent use
of an automobile other than the one specified in the policy, but
not to provide liability coverage in regard to unspecified
automobiles which are furnished or available for the insured's
frequent or regular use.” Waggoner v. Wilson, 507 P.2d 482,
521-22 (Colo. App. 1972).
Colorado courts have consistently upheld the validity of
policies precluding coverage for vehicles that are not owned and
that have been available for “frequent” or “regular use.” See,
e.g., Iowa Mut. Ins. Co. v. Addy, 286 P.2d 622, 624 (Colo. 1955)
(“The automobile here involved was in regular use as contrary to
casual or infrequent use made necessary by the conditions
enumerated in the policy. That being true the exclusionary
clause is made effective and should here be applied.”);
Christian, 962 P.2d at 312 (finding that a “non-owned car”
provision that excluded from coverage a car “furnished or
available for . . . regular or frequent use” was valid, though
provision was not challenged on this basis). Although the
Colorado cases focus on “regular use,” as explained above, this
is due to the fact that the policies at issue limited liability
using this benchmark. A time limitation is equally valid.
With regards to the reasonable expectations of laypersons,
the Colorado Court of Appeals has stated, “The test of the
meaning of a word or phrase under the reasonable expectations
doctrine is what an ordinary layperson would have understood it
to mean. Resort to the doctrine may be appropriate in unique
circumstances or circumstances of extreme unconscionability . .
. . However, the doctrine supplements, but does not substitute
for the ordinary rule that insurance policies are contracts and
therefore generally are to be construed according to wellsettled principles of contract construction.” Shelter Mut. Ins.
Co. v. Breit, 908 P.2d 1149, 1152 (Colo. App. 1995) (citation
omitted). Here, the circumstances are neither unique nor
unconscionable. Yet even applying the doctrine, because the
language of the “non-owned car” provision at issue is clear, the
plain meaning of the provision must govern, and it clearly
precludes coverage for Morris’s rental car.
- 35 -
of use due to its:
a. breakdown; b. repair; c. servicing; d.
damage; or e. theft . . . .”
Policy at 5.
State Farm argues
that the rental car does not qualify as a “temporary substitute
car” because it was not used to replace the 2009 Subaru Outback
listed on the Policy’s declarations page.
Pl.’s Mot. at 17.
State Farm points out that the named insureds’ address is in
Colorado; that Morris listed on his rental agreement a
home/business address in California, and that he alternatively
resides in Colorado; and that the car was rented in Hawaii.
Thus, State Farm argues, “the rental car in this case
was simply a conventional short-term rental by someone who did
not have a vehicle of his own in the area and was not meant to
replace the Subaru because it was unable to be used.”
Bucknell makes no argument with regards to the
“temporary substitute car” provision, and there is nothing in
the record indicating that the rental car was meant to
temporarily replace the 2009 Subaru Outback.
therefore FINDS that the rental car does not qualify as a
“temporary substitute car,” and that Morris is not entitled to
coverage under this provision.
In sum, the Court FINDS as a matter of law that
neither the “non-owned car” provision nor the “temporary
substitute car” provision afford coverage to Morris under the
- 36 -
Furthermore, the Policy does not conflict with Hawaii
law, is not contrary to public policy, and comports with the
reasonable expectations of laypersons.
The Court therefore
GRANTS State Farm’s Motion for Summary Judgment against
Bucknell, and DENIES Bucknell’s Counter Motion for Summary
Judgment on his Counterclaim.
For the foregoing reasons, the Court GRANTS State
Farm’s Motion for Default Judgment or, in the Alternative, for
Summary Judgment Against Defendant Iain Morris, and Summary
Judgment Against Intervenor-Defendant Lawrence Scott Bucknell,
and DENIES Bucknell’s Counter Motion for Summary Judgment on
In so doing, the Court finds as a matter of law
that State Farm has no duty to defend or indemnify Morris for
claims asserted against him in the underlying lawsuit.
IT IS SO ORDERED.
Honolulu, Hawai’i, July 19, 2016.
Alan C. Kay
Sr. United States District Judge
State Farm Mutual Automobile Insurance Company v. Morris, Civ. No. 15-00511
ACK-KJM, Order Granting Plaintiff’s Motion for Default Judgment or, in the
Alternative, for Summary Judgment Against Defendant Iain Morris, and Summary
Judgment Against Intervenor-Defendant Lawrence Scott Bucknell, and Denying
Intervenor-Defendant’s Counter Motion for Summary Judgment on Counterclaim.
- 37 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?