United States Fire Insurance Company v. Hawaiian Canoe Racing Associations et al

Filing 87

ORDER Granting Motion To Dismiss Defendant/Third-Party Plaintiff Mark David Stevens' Third-Party Complaint [Docket 20-2] For Failure To State A Claim re 30 . On the basis of the foregoing, Servco's Motion to Dismiss Defendant/Third-Par ty Plaintiff Mark Davis Stevens' Third-Party Complaint [Dkt. 20-2] for Failure to State a Claim, filed September 28, 2018, is HEREBY GRANTED. Stevens's Third-Party Complaint Against Servco Pacific, Inc., dba Servco Pacific Insurance, filed July 26, 2018, is DISMISSED WITH PREJUDICE. The Clerk's Office is DIRECTED to terminated Servco as a party on May 2, 2019, unless Stevens files a timely motion for reconsideration of the instant Order by May 1, 2019. Signed by JUDGE LESLIE E. KOBAYASHI on 4/17/2019. (cib, )

UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII

UNITED STATES FIRE INSURANCE
COMPANY, A FOREIGN CORPORATION;

CIV. NO. 18-00212 LEK-RLP

Plaintiff,
vs.
HAWAIIAN CANOE RACING
ASSOCIATIONS, HAWAIIAN KAMALI'I
INC., doing business as HAWAIIAN
CANOE CLUB, KIHEI CANOE CLUB,
MARK DAVID STEVENS, DOE
SPOTTER, DOE DEFENDANTS,
Defendants.

ORDER GRANTING MOTION TO DISMISS DEFENDANT/THIRD-PARTY
PLAINTIFF MARK DAVID STEVENS’ THIRD-PARTY COMPLAINT
[DKT. 20-2] FOR FAILURE TO STATE A CLAIM
On September 28, 2018, Third-Party Defendant Servco
Pacific, Inc., doing business as Servco Pacific Insurance
(“Servco”), filed its Motion to Dismiss Defendant/Third-Party
Plaintiff Mark David Stevens’ Third-Party Complaint [Dkt. 20-2]
for Failure to State a Claim (“Motion”).

[Dkt. no. 30.]

On

December 6, 2018, Defendant/Counterclaim Defendant/Cross-claim
Defendant Hawaiian Canoe Racing Association (“HCRA”) filed a
statement of no position.

[Dkt. no. 46.]

Defendant/Third-Party

Plaintiff/Cross-claimant Mark David Stevens (“Stevens”) filed
his memorandum in opposition on February 1, 2019, and Servco
filed its reply on February 8, 2019.

[Dkt. nos. 57, 62.]

This

matter came on for hearing on February 22, 2019.

On March 14,

2019, this Court issued an entering order ruling on the Motion.
[Dkt. no. 73.]
order.

The instant Order supersedes that entering

Servco’s Motion is hereby granted, and the Third-Party

Complaint is hereby dismissed with prejudice, for the reasons
set forth below.
BACKGROUND
The relevant background of this case is described in
this Court’s Order Granting Motions to Dismiss and/or Stay and
Sever Cross-Claim and Granting Joinders in the Motion, filed on
March 29, 2019 (“3/29/19 Order”).

[Dkt. no. 85.1]

Only the

background that is relevant to the instant Motion will be
repeated here.
Plaintiff/Counterclaim Defendant United States Fire
Insurance Company (“US Fire”) filed its Complaint for
Declaratory Judgment (“Complaint”) on June 4, 2018, seeking a
declaratory judgment that it does not have a duty to defend nor
a duty to indemnify HCRA; Stevens; Defendant/Counterclaim
Defendant/Cross-claim Defendant Hawaiian Kamali`i, Inc., doing
business as Hawaiian Canoe Club (“HCC”); Defendant/Counterclaim
Defendant/Cross-claim Defendant Kihei Canoe Club (“KCC” and
collectively “Defendants”); and other Doe defendants, as to

1

The 3/29/19 Order is also available at 2019 WL 1437595.
2

claims arising from a September 17, 2016 incident in which
Faith Ann Kalei-Imaizumi (“Kalei-Imaizumi”) was injured during
the 2016 Pailolo Challenge Outrigger Canoe Race (“2016 Pailolo
Challenge”).

See Complaint at ¶¶ 4, 21-24 & pgs. 31-32.

Kalei-Imaizumi, her husband, and their children (“Underlying
Plaintiffs”) filed an action against Defendants and others in
state court, Kalei-Imaizumi, et al. v. Stevens, et al., Civil
No. 17-1-0474 (“Underlying Action”).

[Id. at ¶¶ 10-11 & Exh. A

(complaint in the Underlying Action (“Underlying Complaint”)).]
Stevens notes that Counts VIII and IX of the
Underlying Complaint allege HCRA, HCC, and KCC (collectively
“Club Defendants”) were negligent in their management of the
2016 Pailolo Challenge because they, inter alia, failed to
obtain insurance coverage appropriate for the race.

[Stevens’s

First Amended Answer to Complaint for Declaratory Judgment,
Filed on June 4, 2018 (“First Amended Answer”), filed 7/26/18
(dkt. no. 20), Third-Party Complaint Against Servco Pacific,
Inc., dba Servco Pacific Insurance (“Third-Party Complaint”) at
¶ 4.]

Stevens asserts the appropriate insurance policy (or

policies) for the Club Defendants’ management of the 2016
Pailolo Challenge would have covered: the Club Defendants; the
Club Defendants’ “employees, agents and servants,” including
Stevens; participants in the 2016 Pailolo Challenge; and “anyone
who might be injured by participating in the canoe race for the
3

contemplated activities in the” 2016 Pailolo Challenge.

[Id.]

Stevens contends that, had the Club Defendants obtained the
appropriate insurance for the 2016 Pailolo Challenge, the
Underlying Plaintiffs’ injuries would have been covered.

[Id.]

Stevens also argues that, “[b]ased on their experience
and earlier races,” the Club Defendants – in particular, HCRA –
were aware that, in order to obtain a permit to conduct the 2016
Pailolo Challenge, “they had to obtain insurance covering the
State of Hawaii, the canoe clubs, boat captains, etc., . . . for
the fiscal protection of the [Club] Defendants and other canoe
clubs, boat captains and others involved in the race, and the
protection of participants (paddlers and those helping with the
race).”

[Id. at ¶ 5.]

Stevens alleges that: when HCRA obtained

insurance for the 2016 Pailolo Challenge, HCRA was acting as an
agent for the Club Defendants; HCRA’s procurement of the
insurance it obtained was negligent because it did not provide
coverage for risks that could be reasonably anticipated; and
HCRA was negligent in failing to obtain other insurance policies
that would have covered reasonably anticipated risks, including
those alleged in the Underlying Complaint.

Stevens asserts the

policy at issue in the Complaint (“Policy”) should provide

4

coverage for HCRA’s negligence regarding insurance procurement.2
[Id. at ¶¶ 6-7.]
In particular, Stevens alleges HCRA, its insurer, and
its insurance broker were named as third-party defendants in
Zbin v. State, Civil No. 12-1-000510 (State of Hawai`i, Second
Circuit Court), because they failed to obtain the proper
insurance for another event.

[Id. at ¶ 8.]

Therefore, Stevens

argues “HCRA knew that issues regarding proper insurance,
coverage and exclusions could arise in a canoe racing event.”
[Id.]

In light of the past litigation, Stevens alleges HCRA

“likely had conversations with representatives of the State of
Hawaii and its insurance broker regarding what insurance
coverage was appropriate.”

[Id. at ¶ 9.]

Further, HCRA either

did the same with its member canoe clubs (including HCC and KCC)
prior to the 2016 Pailolo Challenge or, if it failed to do so,
HCRA was negligent in failing to so advise its members.
¶¶ 9-10.]

[Id. at

Stevens contends that, if HCRA’s handling of the 2016

Pailolo Challenge’s insurance issues was negligent, HCC and KCC

2

The “Policy” refers to Marine Policy No. 830-101897-8,
which US Fire issued to HCRA for the period from January 1, 2016
to January 1, 2017. [Complaint at ¶ 41 & Exh. B (Policy).]
HCRA, as well as “‘[t]he Island Association, its Member Clubs
and their Members and Director & Board Members’” are named
insureds under the Policy. [Complaint at ¶ 41.] HCC and KCC
are members of non-party Maui County Hawaiian Canoe Association
(“Maui HCA”), which is an HCRA Island Association. [Id. at
¶¶ 3-4.]
5

were also negligent because HCRA was acting on their behalf.
Further, Stevens alleges the Club Defendants’ negligence is
covered under the Policy, or would have been covered by other
appropriate insurance policies.

[Id. at ¶¶ 12-13.]

Stevens

asserts the Club Defendants’ failure to obtain the appropriate
insurance was “negligence, fault, breach of duty to Defendant
Stevens (and others), and breach of contract regarding their
management of the race (of which Defendant Stevens was a thirdparty beneficiary).”

[Id. at ¶ 17.]

According to the Third-Party Complaint, Servco was
HCRA’s insurance broker for the Policy, and therefore Servco
“had a legally recognized duty to procure the appropriate
insurance for the reasonably foreseeable scope of injuries that
could be suffered during an open ocean canoe race, and the
participants in that activity.”
omitted).]

[Id. at ¶ 14 (citation

Stevens alleges Servco was negligent in: 1) failing

to diligently determine the necessary insurance for the
foreseeable risks and injuries of the 2016 Pailolo Challenge;
2) failing to provide the Club Defendants with reasonable advice
regarding the necessary insurance; and 3) procuring insurance
that was not appropriate for the event (including procuring
insurance that does not cover the injuries at issue in the
Underlying Action).

[Id. at ¶ 15.]

Stevens asserts he would

have been a third-party beneficiary of the appropriate insurance
6

that Servco should have obtained for HCRA.
Servco has independent liability to him.

Thus, he asserts

[Id.]

He argues he

“is entitled to judgment against Third-Party Defendant Servco
for the costs of his defense and any damages that might be
assessed against him in the Underlying [Action].”

[Id. at

¶ 19.]
Servco seeks dismissal, with prejudice, of the ThirdParty Complaint because: 1) an insurance agent does not owe
duties to third parties who may have benefited if the insured
purchased a different policy; 2) even if such duties exist,
there are insufficient factual allegations to support Stevens’s
argument that he was a third-party beneficiary; and
3) regardless of its merits, the Third-Party Complaint is
improper because it does not seek contribution or indemnity from
Servco for liability Stevens may have to US Fire.
DISCUSSION
I.

Duties of an Insurance Agent
This district court has stated:
In Hawai`i . . . , “[a]n insurance agent
owes a duty to the insured to exercise reasonable
care, skill and diligence in carrying out the
agent’s duties in procuring insurance.” Quality
Furniture, Inc. v. Hay, 61 Haw. 89, 93, 595 P.2d
1066, 1068 (1979). Such a duty is owed to “the
extent of the responsibilities that the agent had
in rendering help and providing advice to the
insured.” Macabio [v. TIG Ins. Co.], 87 Hawai`i
[307,] 318, 955 P.2d [100,] 111 [(1998)] (quoting
Quality Furniture, 61 Haw. at 93, 595 P.2d at
7

1068) (internal quotation marks and brackets
omitted).
Certain Underwriters at Lloyd’s London Subscribing to Policy
No. LL001HI0300520 v. Vreeken, No. 30156, 2014 WL 2949463, at *3
(Hawai`i Ct. App. June 30, 2014) (some alterations in Certain
Underwriters) (emphasis added).

Macabio addressed whether the

insurance agent had a duty to inform the insured about the
recent enactment of a statute that required insurers to offer
the option of stacking uninsured and underinsured motorist
coverage.

87 Hawai`i at 317-19, 955 P.2d at 110-12.

The

Hawai`i Supreme Court stated, “when looking at the facts of each
case to determine the duty of an insurance agent, the nature of
the relationship between the agent and the insured must be
scrutinized.”

Id. at 319, 955 P.2d at 112 (emphasis added).

Quality Furniture also involved a dispute between the insured
and its insurance agents.

The supreme court held that the

agents’ failure to procure insurance when the insured leased
another warehouse was not negligent under the circumstances of
that case, including what the insurer had knowledge of and what
the insured did or failed to do.

Quality Furniture, 61 Haw. at

93, 595 P.2d at 1069.

8

Even assuming that all of the factual allegations of
the Third-Party Complaint are true,3 Stevens is not the insured
who obtained the Policy through Servco and there is no direct
relationship between Servco and Stevens.

Stevens’s position is

that Servco owed him a duty of care, even in the absence of a
direct relationship, because he “would have been a third-party
beneficiary of appropriate insurance that Servco should have
provided” for HCRA.
II.

[Third-Party Complaint at ¶ 15.]

Third-Party Beneficiary
The Hawai`i Supreme Court has stated:
Ordinarily, third-party beneficiary status
is a question of fact as to whether the terms of
the insurance policy reflect an intent to benefit
the provider. See Elsner v. Farmers Ins. Group,
Inc., 364 Ark. 393, 220 S.W.3d 633, 636 (2005)
(holding that the trial court properly granted
defendant-appellee’s motion to dismiss inasmuch
as “there [was] nothing in the contract to
indicate that [plaintiff-appellant] was an
intended third-party beneficiary . . . .”);
Postlewait Constr. Inc. v. Great Am. Ins. Cos.,
106 Wash. 2d 96, 720 P.2d 805, 807 (1986) (“In
order to be a third-party beneficiary entitled to
recover on an insurance contract, it is not
enough that it be intended by one of the parties
to the contract and the third person that the
latter should be a beneficiary. Both parties
must so intend and must indicate that intention
in the contract.”) (Citation omitted.) (Emphasis
added.); 17 Lee R. Russ & Thomas F. Segalla,
3

“Although for the purposes of a motion to dismiss we must
take all of the factual allegations in the complaint as true, we
‘are not bound to accept as true a legal conclusion couched as a
factual allegation.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)).
9

Couch on Insurance 3d § 241:25 at 241–34 (2000)
(“In order for a third party to maintain an
action against an insurer, an intent to make the
obligation inure to the benefit of such person
must clearly appear in the contract of insurance,
and, if any doubt exists, the contract should be
construed against such intent.”) (Footnotes
omitted.).
Jou v. Dai-Tokyo Royal State Ins. Co., 116 Hawai`i 159, 168, 172
P.3d 471, 480 (2007) (alterations and emphasis in Jou) (some
citations omitted).

The primary inquiry in determining whether

a person is a third-party beneficiary to a contract is whether
the contract itself indicates that the parties to the contract
intended to confer third-party beneficiary status on that
person.

Because Stevens’s position is that he would have been a

third-party beneficiary if Servco had obtained an insurance
policy that was appropriate for HCRA, [Third-Party Complaint at
¶ 15,] there is no contract to examine.

Further, Stevens has

not alleged what the terms of the hypothetical insurance policy
would have been.
Besides establishing his status through the terms of
the agreement itself, Stevens could allege he was a third-party
beneficiary based on the following framework:
(1) . . . a beneficiary of a promise is an
intended beneficiary if recognition of a right to
performance in the beneficiary is appropriate to
effectuate the intention of the parties and
either

10

(a) the performance of the promise will
satisfy an obligation of the promisee to pay
money to the beneficiary; or
(b) the circumstances indicate that the
promisee intends to give the beneficiary the
benefit of the promised performance.
(2) An incidental beneficiary is a beneficiary
who is not an intended beneficiary.
Jou, 116 Hawai`i at 168-69, 172 P.3d at 480-81 (quoting
Restatement (Second) of Contracts § 302 (1981)).

The factual

allegations of the Third-Party Complaint do not support any of
the elements of this framework.

The Third-Party Complaint

therefore fails to plead sufficient factual allegations to
support a reasonable inference that Stevens was a third-party
beneficiary of any insurance policy that Servco obtained, or
could have obtained, on HCRA’s behalf.

See Iqbal, 556 U.S. at

678 (“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” (quoting Twombly, 550
U.S. at 570)); id. (“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.” (citing Twombly, 550 U.S. at 556)).

The

Third-Party Complaint therefore fails to state a claim upon
which relief can be granted, see Fed. R. Civ. P. 12(b)(6), and
must be dismissed.

11

It is arguably possible for Stevens to amend the
Third-Party Complaint to include sufficient factual allegations
to support his position that he is a third-party beneficiary.
See Sonoma Cty. Ass’n of Retired Emps. v. Sonoma Cty., 708 F.3d
1109, 1118 (9th Cir. 2013) (“As a general rule, dismissal
without leave to amend is improper unless it is clear, upon de
novo review, that the complaint could not be saved by any
amendment.” (brackets, citation, and internal quotation marks
omitted)).

However, in determining whether to grant Stevens’s

leave to amend, this Court must also address whether the amended
third-party complaint would satisfy Fed. R. Civ. P. 14.
III. Fed. R. Civ. P. 14
Rule 14(a)(1) states, in pertinent part: “A defending
party may, as third-party plaintiff, serve a summons and
complaint on a nonparty who is or may be liable to it for all or
part of the claim against it.”

This Court has stated:

“The decision to allow a third-party defendant to
be impleaded under rule 14 is entrusted to the
sound discretion of the trial court.” United
States v. One 1977 Mercedes Benz, 708 F.2d 444,
452 (9th Cir. 1983). A third-party claim “may be
asserted only when the third party’s liability is
in some way dependant [sic] on the outcome of the
main claim and the third party’s liability is
secondary or derivative.” [Id.] “The crucial
characteristic of a Rule 14 claim is that
defendant is attempting to transfer to the thirdparty defendant the liability asserted against
him by the original plaintiff. The mere fact
that the alleged third-party claim arises from
the same transaction or set of facts as the
12

original claim is not enough.” Stewart v.
American Int’l Oil & Gas Co., 845 F.2d 196, 200
(9th Cir. 1988) (quoting Wright & Miller, 6 Fed.
Prac. & Proc. § 1446 at 257 (1971 ed.)). “It is
not sufficient that the third-party claim is a
related claim; the claim must be derivatively
based on the original plaintiff’s claim.” One
1977 Mercedes Benz, 450 SEL, 708 F.2d at 452.
Hawaii FIT Four LLC v. Ford, CIVIL NO. CV 16-00607 LEK-RLP, 2017
WL 4928612, at *3 (D. Hawai`i Aug. 8, 2017).
The original plaintiff in this case is US Fire.

As to

Stevens, US Fire seeks a declaratory judgment that it has no
duty to defend and no duty to indemnify him under the Policy for
the Underlying Plaintiffs’ claims or any other claims that may
arise from the incident at issue in the Underlying Action.
[Complaint at pgs. 31-32.]
damages from Stevens.

US Fire does not seek an award of

Thus, the Third-Party Complaint does not

“attempt[] to transfer to [Stevens] the liability asserted
against him by” US Fire.

See Stewart, 845 F.2d at 200.

The

fact that both Stevens’s claim against Servco and US Fire’s
claims against Defendants require consideration of the 2016
Pailolo Challenge and Kalei-Imaizumi’s injury is not enough.
See id.

Even if Stevens amended his Third-Party Complaint to

include additional allegations supporting his third-party
beneficiary theory, it would not change the fact that US Fire
does not seek damages from Stevens.

Because allowing Stevens to

amend his Third-Party Complaint would be futile, the dismissal

13

must be with prejudice.

See Leadsinger, Inc. v. BMG Music

Publ’g, 512 F.3d 522, 532 (9th Cir. 2008) (noting that futility
of amendment is an accepted basis to deny leave to amend).
However, nothing in this Order prevents Stevens from
filing his claim against Servco in a separate action, in the
appropriate forum.
CONCLUSION
On the basis of the foregoing, Servco’s Motion to
Dismiss Defendant/Third-Party Plaintiff Mark Davis Stevens’
Third-Party Complaint [Dkt. 20-2] for Failure to State a Claim,
filed September 28, 2018, is HEREBY GRANTED.

Stevens’s Third-

Party Complaint Against Servco Pacific, Inc., dba Servco Pacific
Insurance, filed July 26, 2018, is DISMISSED WITH PREJUDICE.
The Clerk’s Office is DIRECTED to terminate Servco as
a party on May 2, 2019, unless Stevens files a timely motion for
reconsideration of the instant Order by May 1, 2019.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAI`I, April 17, 2019.

UNITED STATES FIRE INSURANCE CO. VS. HAWAIIAN CANOE RACING
ASSOCIATION, ET AL.; CV 18-00212 LEK-RLP; ORDER GRANTING MOTION
TO DISMISS DEFENDANT/THIRD-PARTY PLAINTIFF MARK DAVID STEVENS'
THIRD-PARTY COMPLAINT [DKT. 20-2] FOR FAILURE TO STATE A CLAIM
14