Group Builders Inc v. Admiral Ins. Co.

Decision Date19 May 2010
Docket NumberNo. 29402.,29402.
Citation231 P.3d 67,123 Hawai'i 142
PartiesGROUP BUILDERS, INC. and Tradewind Insurance Company, Ltd., Plaintiffs/Counterclaim Defendants-Appellants/Cross-Appellees,v.ADMIRAL INSURANCE COMPANY, Defendant/Counterclaimant/Cross-Claimant-Appellee/Cross-Appellant,andNational Interstate Insurance Company; Servco Insurance Services Corp., formerly known as and/or doing business as American Insurance Agency, Inc. and American Insurance Agency; National Interstate Insurance Company of Hawaii, Inc., Defendants-Appellees/Cross-Appellants,andZurich American Insurance Company, Defendant/Cross-Claim Defendant-Appellee.
CourtHawaii Court of Appeals

Wesley H. Sakai, Jr. (Bendet, Fidell, Sakai & Lee), Melvyn M. Miyagi (Watanabe & Ing, LLP), Honolulu, on the briefs, for Plaintiffs/Counterclaim Defendants-Appellants/Cross-Appellees.

Joseph F. Kotowski, III, Honolulu, Allen R. Wolff, (Olshan Grundman Frome Rosenzweig & Wolosky LLP), on the briefs, for Defendant/Counterclaimant/Cross-Claimant-Appellee/Cross-Appellant Admiral Insurance Company.

FOLEY, PRESIDING J., FUJISE and REIFURTH, JJ.

Opinion of the Court by FOLEY, J.

In a case arising out of an insurance dispute, Plaintiffs/ Counterclaim Defendants-Appellants/Cross-Appellees Group Builders, Inc. (Group) and Tradewind Insurance Company, Ltd. (Tradewind) (collectively, Plaintiffs) appeal from the “Order Granting Plaintiffs' Motion for (1) Rule 54(b) Certification Re Various Orders or, (2) with Respect to the Order Granting Defendant Admiral Insurance Company's Motion for Partial Summary Judgment Re: No Duty to Indemnify, in the Alternative, for Leave to File an Interlocutory Appeal, and (3) for a Stay of These Proceedings Pending Appeal, Filed on September 3, 2008 filed on October 3, 2008 in the Circuit Court of the First Circuit 1 (circuit court).

The instant appeal originally consisted of (1) Plaintiffs' appeal from six circuit court orders; (2) a cross-appeal of Defendants-Appellees/Cross-Appellants National Interstate Insurance Company (National Interstate), National Interstate Insurance Company of Hawaii (National Interstate of Hawaii), and Servco Insurance Services Corp. (Servco) from three circuit court orders; and (3) a cross-appeal of Defendant/Counterclaimant/Cross-Claimant-Appellee/Cross-Appellant Admiral Insurance Company (Admiral) from a separate order.

In this court's February 12, 2009 “Order Partially Dismissing Appeal and Completely Dismissing All Cross-Appeals,” we dismissed for lack of jurisdiction all of the cross-appeals and Plaintiffs' appeal from the various orders except for Plaintiffs' appeal of the circuit court's September 23, 2008 “Order Granting Defendant Admiral Insurance Company's Motion for Partial Summary Judgment Re: No Duty to Indemnify, Filed on June 25, 2008 (Order Granting Admiral's MPSJ). We concluded that this order had been properly certified for interlocutory appeal pursuant to HRS § 641-1(b) (1993 & Supp.2009).

On appeal, Plaintiffs' sole point of error is that the circuit court erred in holding there was no genuine issue of material fact and in dismissing the claims for Admiral's breach of its duty to indemnify Group, as a matter of law.

We disagree with Plaintiffs' point of error and affirm the circuit court's Order Granting Admiral's MPSJ.

I.

Hilton Hotels Corporation (HHC) is the parent of Hilton Hawaiian Village, LLC (HHV). By contract dated August 2, 1999, HHC employed Hawaiian Dredging as the general contractor for construction of the Kalia Tower (Tower) that was to be built as part of the Hilton Hawaiian Village in Waikiki, Honolulu, Hawai‘i. Hawaiian Dredging subcontracted Group to install an exterior insulation finishing system and sealant, spray-applied fireproofing, building insulation, and metal wall framing on the Tower.

From October 1, 2000 to December 1, 2000, Admiral provided Group with commercial general liability (CGL) insurance coverage.2

After construction on the Tower had been completed, the Tower guest rooms were opened to the public in May 2001. In mid-2002, extensive mold growth was discovered in the guest rooms. On July 24, 2002, HHC and HHV closed the guest rooms on floors 5 through 25 of the Tower for remediation. An investigation revealed numerous material defects in the design and construction of the Tower. Some of these defects substantially contributed to or caused the mold growth.

HHC and HHV filed suit in 2003 against numerous defendants, including Group, for the construction defects and closure of the Tower (Tower lawsuit). In their complaint, HHC and HHV alleged five causes of action against Group: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) negligence, (4) breach of express and implied warranties, and (5) negligent misrepresentation. After receiving notice of the lawsuit, Admiral refused to defend, indemnify, or otherwise provide insurance coverage to Group for the claims asserted in the Tower lawsuit.

A settlement as to HHC and HHV's claims was reached involving Tradewind, Group, Defendant/Cross-Claim Defendant-Appellee Zurich American Insurance Co. (Zurich), and Fireman's Fund Insurance Company of Hawaii, Inc. (Fireman's Fund). In connection with the settlement, Group assigned its claims against Admiral, as well as the right to sue in Group's name, to Tradewind.

On December 13, 2005, Plaintiffs filed a complaint. On May 30, 2006, Plaintiffs filed a First Amended Complaint against, inter alia, Admiral 3 for its refusal to defend, indemnify, or otherwise provide insurance coverage to Group for the claims asserted in the Tower lawsuit.

In the course of the proceedings, Admiral filed a Motion for Partial Summary Judgment Re: No Duty to Indemnify” on June 25, 2008 (Admiral's MPSJ). Plaintiffs opposed the motion. The circuit court granted Admiral's MPSJ.

On September 3, 2008, Plaintiffs filed a Motion for (1) Rule 54(b) Certification Re: Various Orders or, (2) with Respect to the Order Granting Defendant Admiral Insurance Company's Motion for Partial Summary Judgment Re: No Duty to Indemnify, in the Alternative, for Leave to File an Interlocutory Appeal, and (3) for a Stay of These Proceedings Pending Appeal.” The circuit court granted this motion, directing entry of final judgment as to various orders and certifying the Order Granting Admiral's MPSJ for interlocutory appeal under Hawaii Revised Statutes (HRS) § 641-1(b).4

On February 12, 2008, this court dismissed all appeals for lack of jurisdiction, except for the interlocutory appeal of the Order Granting Admiral's MPSJ.

II.
On appeal, the grant or denial of summary judgment is reviewed de novo. See State ex rel. Anzai v. City and County of Honolulu, 99 Hawai‘i 508, 514, 57 P.3d 433, 439 (2002); Bitney v. Honolulu Police Dep't, 96 Hawai‘i 243, 250, 30 P.3d 257, 264 (2001).

[S]ummary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A fact is material if proof of that fact would have the effect of establishing

or refuting one of the essential elements of a cause of action or defense asserted by the parties. The evidence must be viewed in the light most favorable to the non-moving party. In other words, we must view all of the evidence and inferences drawn therefrom in the light most favorable to the party opposing the motion.
Kahale v. City and County of Honolulu, 104 Hawai‘i 341, 344, 90 P.3d 233, 236 (2004) (citation omitted).

Nuuanu Valley Ass'n v. City & County of Honolulu, 119 Hawai‘i 90, 96, 194 P.3d 531, 537 (2008).

III.

Plaintiffs contend the circuit court erred in granting Admiral's MPSJ. The circuit court held:

IT IS HEREBY ORDERED, ADJUDGED AND DECREED, without prejudice to any other issues in support of the Motion, that because there is no genuine issue of material fact that any property damage as a result of an occurrence took place at Kalia Tower Project during the Admiral Policy period, which is required for coverage under Admiral's Policy, Admiral's [MPSJ] is GRANTED.

Plaintiffs argue that the circuit court “erroneously concluded that there was no evidence of property damage caused by an occurrence during [Admiral's] Policy Period and dismissed the indemnity claim.”

As a preliminary matter, we note that Admiral's CGL policy obligates Admiral to pay “those sums that the insured [Group] becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” The policy further indicates:

b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”; and
(2) The “bodily injury” or “property damage” occurs during the policy period.

The policy defines “property damage” as:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

The mold damage and resulting loss of use of the Tower qualifies as “property damage” under the policy. The issue is whether this “property damage” was caused by an “occurrence” during the policy period. The policy defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

In their complaint, HHC and HHV identified the primary causes/contributing factors of the mold damage and closure of the Tower:

35. On July 24, 2002, following a preliminary evaluation of conditions in the building, [HHC and HHV] closed the guest rooms on floors 5 through 25 of the Kalia Tower to the public.
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