Dairy Road Partners v. Island Ins.

Decision Date01 February 2000
Docket Number No. 21402, No. 21439.
Citation92 Haw. 398,992 P.2d 93
PartiesDAIRY ROAD PARTNERS, dba Dairy Road Shell, Plaintiff-Appellee/Cross-Appellant, and Shell Oil Company, Plaintiff, v. ISLAND INSURANCE COMPANY, LTD., a Hawai`i corporation, Defendant-Appellant/Cross-Appellee.
CourtHawaii Supreme Court

Eric S. Yamagata, Honolulu, for the plaintiff-appellee/cross-appellant Dairy Road Partners, dba Dairy Road Shell.

Roy F. Hughes and Ross N. Taosaka (Hughes & Taosaka) Honolulu, for the defendant-appellant/cross-appellee Island Insurance Co., Ltd.

MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, JJ.

Opinion of the Court by LEVINSON, J.

In this consolidated appeal, both parties1 challenge portions of the first circuit court's orders granting in part and denying in part their cross-motions for summary judgment. The case arises out of a complaint filed by the plaintiff-appellee/cross-appellant Dairy Road Partners, dba Dairy Road Shell [hereinafter, DRP], and the plaintiff Shell Oil Company [hereinafter, Shell] seeking a declaration that the defendant-appellant/cross-appellee Island Insurance Company [hereinafter, Island] has a duty to defend and indemnify DRP and Shell, pursuant to four separate insurance policies issued by Island to DRP, in two separate lawsuits concerning an automobile accident allegedly caused by a DRP employee (collectively, "the underlying lawsuits").2 On cross-motions for summary judgment, the circuit court ruled that (1) Island is not required to defend or indemnify DRP or Shell pursuant to (a) DRP's business auto policy or (b) DRP's commercial general liability policy, but (2) a genuine issue of material fact remained with regard to whether Island is required to defend and indemnify DRP and Shell pursuant to DRP's (a) commercial garage liability policy and (b) commercial umbrella insurance policy. Accordingly, the circuit court granted Island's motion for summary judgment with respect to the business auto policy and the commercial general liability policy but denied it with respect to the commercial garage liability policy and the commercial umbrella insurance policy. The circuit court also purported to grant in part and deny in part DRP's motion for summary judgment, although it articulated the same conclusions with regard to all four policies described above.

On appeal, Island argues that the circuit court erred in denying its motion for summary judgment with respect to its duty to defend and indemnify pursuant to the commercial garage liability policy and the commercial umbrella insurance policy because Island had made an adequate showing that there is no possibility of coverage under either policy. We hold that DRP established, as a matter of law, that there was a possibility of coverage under the commercial garage liability policy at the time of tender of defense. However, inasmuch as DRP raised the issue of indemnity in its complaint, in connection with which Island adduced uncontroverted evidence demonstrating that the accident is not covered by the commercial garage liability policy, we hold that Island was entitled both to a judgment that it has no duty to indemnify DRP and that, as of the date of the entry of the circuit court's judgment to that effect, Island's duty to defend will also end. Therefore, pursuant to the commercial garage liability policy, Island is responsible for the costs of DRP's defense incurred between the date of tender and the date of the circuit court's judgment, but not for any subsequent costs. With respect to the commercial umbrella insurance policy, we hold, as a matter of law, that Island was entitled to a judgment that it had no duty to defend or indemnify DRP.

In its cross-appeal, DRP argues that the circuit court erred in granting Island's motion for summary judgment in connection with Island's duty to defend and indemnify, pursuant to the business auto policy and the commercial general liability policy, because there were no applicable exclusions to policy coverage and Island failed to demonstrate that there was no possibility of coverage under either policy. DRP further argues that the circuit court erred in denying its motions for reconsideration of the circuit court's orders granting in part and denying in part its motions for summary judgment. With regard to the commercial general liability policy, we hold that Island was entitled to summary judgment on the issue of both its duty to defend and its duty to indemnify. With regard to the business auto policy, we hold that Island is obligated to defend and indemnify DRP.

Accordingly, we vacate the circuit court's Hawai`i Rules of Civil Procedure (HRCP) Rule 54 judgment and the foundational orders concerning the parties' motions for summary judgment and remand for: (1) the entry of an order (a) granting in part and denying in part Island's motion for summary judgment with respect to its duty to defend and indemnify DRP pursuant to the commercial garage liability policy, (b) denying Island's motion for summary judgment with respect to Island's duty to defend DRP pursuant to the business auto policy, and (c) granting Island's motion for summary judgment with respect to Island's duty to defend DRP pursuant to the commercial general liability policy and the commercial umbrella insurance policy; and (2) the entry of an order (a) granting in part and denying in part DRP's motion for summary judgment with regard to the commercial garage liability policy, (b) granting summary judgment in favor of DRP with respect to Island's duty to defend DRP pursuant to the business auto policy, and (c) denying DRP's motion for summary judgment with respect to the commercial general liability policy and the commercial umbrella insurance policy.

I. BACKGROUND
A. The Underlying Lawsuits

On March 9, 1994, June Wolken-Vierra, as guardian ad litem of Alan Kaua Vierra, a minor, and as personal representative of the estate of Alvin K. Vierra, Jr., filed a complaint (Civil No. 94-0157(2)) in the second circuit court, naming Shell, Garth Nakamura, and Brian Connelly as defendants. The complaint alleged in relevant part:

... On November 25, 1993, in the early morning hours, shortly before the death of ALVIN K. VIERRA, JR., ... NAKAMURA was consuming alcoholic beverages at the Dairy Road Station, Kahului, Hawaii.
... On Thursday, November 25, 1993, ALVIN K. VIERRA, JR. was hit by a vehicle driven by ... NAKAMURA, and[,] as he lay in the road[,] ALVIN K. VIERRA, JR. was run over by a vehicle driven by ... CONNELLY.
... At all times material, ... NAKAMURA[ ] was employed by the SHELL OIL CO. and was acting within the scope of his employment when he consumed alcohol and drove a motor vehicle into ALVIN K. VIERRA, JR., who was a pedestrian.
. . . .
... The conduct of Defendants [was] negligent.
... As a direct proximate and legal result of the conduct of Defendants aforesaid, or any of them, ALVIN K. VIERRA, JR. was killed after he sustained serious physical injury, pain and suffering[,] and other damages as shall be proved at the time of trial.

On February 6, 1995, Wolken-Vierra filed a motion for an order identifying DRP as a "Doe Partnership," averring in an affidavit of counsel that "investigation has revealed that [DRP] was an employer of ... Nakamura." The circuit court granted the motion in an order dated the same day.

On June 17, 1994, Thelma Vierra and Alvin K. Vierra, Sr. (collectively, the Vierras), who are apparently the parents of the decedent, Alvin K. Vierra, Jr., filed a separate complaint (Civil No. 94-0452(2)) in the second circuit court, naming Shell, Nakamura, and Connelly as defendants. The Vierras' complaint made allegations similar to those in Wolken-Vierra's complaint. The Vierras' complaint, however, also alleged vicarious liability on the part of Shell. On November 22, 1995, the Vierras filed a first amended complaint, naming DRP as a defendant and additionally alleging in relevant part that: (1) Nakamura had acted within the scope of his "agency or employment during the events that caused or contributed to the accident"; (2) DRP had been negligent in "allowing the drinking of alcohol on its premises"; and (3) DRP was vicariously liable for Nakamura's negligence.

B. The Insurance Policies

On cross-motions for summary judgment in the present case, see infra, section I.C, both parties adduced evidence that, at the time of the alleged accident, DRP was the named insured on four separate insurance policies issued by Island: (1) a business auto policy (Policy No. BAP 12054); (2) a commercial garage liability policy (Policy No. CGP 60245-01); (3) a commercial general liability policy (Policy No. IM XXXXXX-XX); and (4) a commercial umbrella insurance policy (Policy No. IUB XXXXXXX-XX).

1. The business auto policy

In the section entitled "PART IV—LIABILITY INSURANCE," the business auto policy provides in relevant part:

A. WE WILL PAY.
1. We will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.
2. We have the right and duty to defend any suit asking for these damages. However, we have no duty to defend suits for bodily injury or property damage not covered by this policy. We may investigate and settle any claim or suit as we consider appropriate. Our payment of the LIABILITY INSURANCE limit ends our duty to defend or settle.....
D. WHO IS INSURED.
1. You are an insured for any covered auto.

(Emphases added.) "Bodily injury" is defined in Part I of the policy as "bodily injury, sickness or disease including death from any of these."

Part II of the policy provides in relevant part that "ITEM TWO of the declarations shows the autos that are covered autos for each of your coverages. The numerical symbols explained in ITEM THREE of the declarations describe which autos that are covered autos. ...

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