88 Hawai'i 122, Foote v. Royal Ins. Co. of America

Decision Date31 July 1998
Docket NumberNo. 20896,20896
Citation88 Hawaii 122,962 P.2d 1004
Parties88 Hawai'i 122 Arthur FOOTE, Plaintiff-Appellant, v. ROYAL INSURANCE COMPANY OF AMERICA, an Illinois corporation, Defendant-Appellee, John Does 1-10; Arthur FOOTE, Plaintiff-Appellant, v. Jane DOES 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Doe Non-profit Entities 1-10; Doe Governmental Entities 1-10, Defendants
CourtHawaii Court of Appeals

Ian L. Mattoch and Daniel P. Kirley (Law Offices of Ian L. Mattoch, of counsel) on the brief for Plaintiff-Appellant.

Eric T.W. Kim (Lee, Kim, Wong, Yee & Lau, of counsel) on the brief for Defendant-Appellee.

Before BURNS, C.J., and ACOBA and KIRIMITSU, JJ.

KIRIMITSU, Associate Justice.


Plaintiff-Appellant Arthur Foote (Plaintiff) appeals the First Circuit Court's July 21, 1997 Order Granting Defendant[-Appellant] Royal Insurance Company of America's [ (Royal) ] Motion for Summary Judgment Filed 5/9/97, and Denying Plaintiff Arthur Foote's Motion for Summary Judgment Filed 4/22/97 (July 21, 1997 summary judgment order), and August 12, 1997 Judgment. For the reasons set forth below, we affirm.


The facts stated herein were stipulated to by Plaintiff and Royal. Plaintiff was the vice-president, treasurer, director, and a fifty-percent shareholder in a closely held corporation called Down Under Enterprises, Ltd., dba Sign Craft (Sign Craft). Sign Craft was insured under a commercial business automobile policy issued by Royal. The named insured under the policy was the corporate entity "Down Under Enterprises, Ltd. DBA: Sign Craft."

The policy stated in relevant part:


In return for the payment of the premium and subject to all the terms of this policy, we agree with you as follows:


The following words and phrases have special meaning throughout this policy and appear in boldface type when used:

A. "You" and "your" mean the person or organization shown as the named insured in ITEM ONE of the declarations.


F. "Insured" means any person or organization qualifying as an insured in the WHO IS INSURED section of the applicable insurance....

* * * *



Named Insured[:] Down Under Enterprises, Ltd.

DBA: Sign Craft




1. "Family member" means a person related to you by blood, marriage or adoption who is a resident of your household, including a ward or foster child.



1. We will pay all sums the "insured" is legally entitled to recover as damages from the owner or driver of an "underinsured motor vehicle." The damages must result from "bodily injury" sustained by the "insured" caused by an "accident". The owner's or driver's liability for these damages must result from the ownership, maintenance or use of the "underinsured motor vehicle".



1. You or any "family member".

2. Anyone else "occupying" a covered "auto" or a temporary substitute for a covered "auto". The covered "auto" must be out of service because of its breakdown, repair, servicing, "loss" or destruction.

3. Anyone for damages he [or she] is entitled to recover because of "bodily injury" sustained by another "insured."


On June 10, 1994, Plaintiff was operating his own personal moped when he was struck by an automobile operated by Philip F. Farley (Farley). The moped was not a "covered auto" under the Royal policy. Plaintiff and Farley settled for $135,000, Farley's limits of liability, and thereafter, Plaintiff filed a claim with Royal for underinsured motorist (UIM) benefits. Royal denied the claim on the grounds that Plaintiff was not an insured as defined under the policy.

On November 21, 1996, Plaintiff filed this declaratory relief action seeking a declaration that Plaintiff is entitled to UIM benefits under Royal's policy as a result of the moped accident. On July 21, 1997, the circuit court granted Royal's motion for summary judgment and denied Plaintiff any relief. On August 12, 1997, judgment was entered in favor of Royal and against Plaintiff. Plaintiff timely filed his notice of appeal.


Plaintiff appeals the July 21, 1997 summary judgment order.

On appeal, an order of summary judgment is reviewed under the same standard applied by the trial courts. Summary 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 of material fact and the moving party is entitled to a judgment as a matter of law.

Pacific Int'l Servs. Corp. v. Hurip, 76 Hawai'i 209, 213, 873 P.2d 88, 92 (1994) (quotation marks and citations omitted).


It is uncontested that Plaintiff is not entitled to UIM benefits as a Class II insured 1 under the policy because he was not occupying an insured auto at the time of the accident; he was driving his own personal moped. Thus, the dispositive question is whether, under the facts of this case, Plaintiff is entitled to UIM benefits as a Class I named insured 2 under the policy. This determination requires an interpretation of the insurance policy.

A. Principles of contract construction.

[I]nsurance policies are subject to the general rules of contract construction; the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended. Moreover, every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.

Nevertheless, adherence to the plain language and literal meaning of insurance contract provisions is not without limitation. We have acknowledged that because insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and any ambiguities must be resolved against the insurer. Put another way, the rule is that policies are to be construed in accord with the reasonable expectations of a layperson.

Dawes v. First Ins. Co., 77 Hawai'i 117, 121, 883 P.2d 38, 42 (quotation marks, brackets, and citations omitted) (emphasis added), reconsideration denied, 77 Hawai'i 489, 889 P.2d 66 (1994). Thus, we ask ourselves whether the insurance policy in this case is ambiguous.

B. The policy is not ambiguous.

Plaintiff argues that the insurance policy in this case is ambiguous to a reasonable layperson because the policy provisions which refer to individuals and family relationships do not make sense when the named insured is a corporate entity rather than a natural person. In that sense, because a corporation cannot sustain "bodily injury" or have "family members," Plaintiff could have reasonably concluded that Plaintiff qualified as a named insured because he was the sole shareholder, officer, and director of the "named insured" (i.e., the corporation), and therefore one of the only representatives of the corporation who could possibly sustain "bodily injury" or have "family members."

A small handful of jurisdictions agree with Plaintiff's reasoning that because a corporation cannot have "family members," inclusion of a "family members" clause in a business policy issued to a small family-owned-and-operated business is ambiguous in that it could "reasonably be understood as providing uninsured [or underinsured] motorist insurance for members of the [company] family independent of whether they were occupying a covered automobile at the time of injury." Ceci v. National Indem. Co., 225 Conn. 165, 622 A.2d 545, 549 (1993); see also King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 N.E.2d 1380, 1384 (1988) (finding ambiguity with the "family members" clause of the commercial auto policy).

However, a vast majority of jurisdictions believe that the "family member" clause does not render a policy ambiguous, and therefore an officer or shareholder of a closely held corporation is not entitled to UIM benefits as a "named insured" under the business policy. See American States Ins. Co. v. C & G Contr., Inc., 186 Ariz. 421, 924 P.2d 111, 115 (Ct.App.1996) (holding that the clause was not ambiguous where injured was president of corporation); Lampkin v. National Union Fire Ins. Co., 581 So.2d 175, 175-76 (Fla.Ct.App.1990) (holding the same where injured was employee listed as the operator of a corporation's vehicle); Bernard v. Nationwide Mut. Fire Ins. Co., 206 Ga.App. 519, 426 S.E.2d 29, 31-32 (1992) (holding the same where injured was corporate officer); Economy Preferred Ins. Co. v. Jersey County Constr., 246 Ill.App.3d 387, 186 Ill.Dec. 233, 615 N.E.2d 1290, 1293 (holding the same where injured was president's daughter), cert. denied, 152 Ill.2d 557, 190 Ill.Dec. 886, 622 N.E.2d 1203 (1993); Huebner v. MSI Ins. Co., 506 N.W.2d 438, 441 (Iowa 1993) (holding the same where injured was family member of employee); Meche v. Thibodeaux, 550 So.2d 346, 349-50 (La.Ct.App.1989) (holding the same where injured was half-owner of corporation), cert. denied, 558 So.2d 1124 (1990); Langer v. United States Fidelity & Guar. Co., 552 A.2d 20, 22 (Me.1988) (holding the same where injured was ward of the state); Andrade v. Aetna Life & Cas. Co., 35 Mass.App.Ct. 175, 617 N.E.2d 1015, 1017 (holding the same where injured was employee of corporation), review denied, 416 Mass. 1105, 621 N.E.2d 685 (1993); Ott v. Firemen's Fund Ins. Co., 936 S.W.2d 165, 166 (Mo.Ct.App.1996) (holding the same where injured was president of closely held corporation); Busby v. Simmons, 103 N.C.App. 592, 406 S.E.2d 628, 630 (1991) (holding the same where injured was majority stockholder of...

To continue reading

Request your trial
21 cases
  • Westfield Ins. Co. v. Galatis
    • United States
    • Ohio Supreme Court
    • 5 Noviembre 2003
    ...455; Buckner v. Motor Vehicle Acc. Indemn. Corp. (1985), 66 N.Y.2d 211, 495 N.Y.S.2d 952, 486 N.E.2d 810; Foote v. Royal Ins. Co. of Am. (1998), 88 Hawaii 122, 962 P.2d 1004; Am. States Ins. Co. v. C & G Contracting, Inc. (1996), 186 Ariz. 421, 924 P.2d 111; Michigan Twp. Participating Plan......
  • Allstate Ins. Co. v. Davis
    • United States
    • U.S. District Court — District of Hawaii
    • 1 Mayo 2006
    ...the insurer. State Farm Fire & Casualty Co. v. Gorospe, 106 F.Supp.2d 1028, 1031 (D.Haw.2000) (citing Foote v. Royal Insurance Co. of America, 88 Hawaii 122, 962 P.2d 1004 (1998)). "Put another way, the rule is that policies are to be construed in accord with the reasonable expectations of ......
  • American Economy Ins. Co. v. Bogdahn
    • United States
    • Oklahoma Supreme Court
    • 10 Febrero 2004
    ...426 S.E.2d 29 (1992); Hogan v. Mayor & Aldermen of Savannah, 171 Ga.App. 671, 320 S.E.2d 555 (1984); Foote v. Royal Ins. Co. of America, 88 Hawai'i 122, 962 P.2d 1004 (Haw.App.1998); Rohe v. CNA Ins. Co., 312 Ill.App.3d 123, 244 Ill.Dec. 442, 726 N.E.2d 38 (2000); Economy Preferred Ins. Co.......
    • United States
    • Hawaii Supreme Court
    • 12 Mayo 2005
    ...although "temporarily liv[ing] elsewhere." HRS § 431:10C-103. In this connection, Defendant asserts, based on Foote v. Royal Ins. Co. of Am., 88 Hawai'i 122, 962 P.2d 1004 (1998), and to a certain extent, Kok, that "the language of the [P]olicy is not ambiguous." Defendant's reliance on the......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT