Apana v. Tig Ins. Co.
| Decision Date | 16 August 2007 |
| Docket Number | Civil No. 06-00653 JMS/LEK. |
| Citation | 504 F.Supp.2d 998 |
| Parties | Bill H. APANA, as Personal Representative of the Estate of Corrine Apana, Plaintiff, v. TIG INSURANCE COMPANY; John Does 1-10; Jane Does 1-10; Doe Corporation 1-10, Defendants. |
| Court | U.S. District Court — District of Hawaii |
Joe P. Moss, Lihue, HI, for Plaintiff.
Doris D.G. Lum, Greg H. Takase, Leah M. Reyes, Lynn B.K. Costales, Henderson Gallagher & Kane, Honolulu, HI, J. Patrick Gallagher, Heller Ehrman White & McAuliffe, Palo Alto, CA, for Defendants.
AMENDED ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This diversity case raises three questions relating to Hawaii state insurance law: (1) whether the Defendant, TIG Insurance Company ("TIG"), had a duty to defend against Plaintiff Bill Apana's ("Plaintiff") claims where courts nationwide are divided on the applicable legal issue and the Hawaii Supreme Court and Hawaii Intermediate Court of Appeals have not addressed the topic; (2) whether a Total Pollution Exclusion Endorsement precludes coverage under state law where an individual inhaled noxious fumes released when a plumber used chemicals to treat a clogged drain; and (3) whether TIG's refusal to tender a defense and its denial of coverage constituted bad faith. The court finds that TIG had a duty to defend but that TIG was not required to indemnify based on the Total Pollution Exclusion Endorsement. The court also finds that TIG did not act in bad faith when denying coverage but that it is premature to ascertain whether TIG acted in bad faith when declining to defend. The court therefore GRANTS IN PART AND DENIES IN PART TIG's Motion for Summary Judgment.
On March 21, 2002, Corrine Apana ("Corrine") was working at the Wal-Mart shopping center in the city of Lihue, Hawaii, located on the island of Kauai. Dennis' Marugame ("Marugame"), a plumber employed by H. Marugame Plumbers, Inc. ("HMP, Inc."), was also at Wal-Mart, performing plumbing work on a maintenance drain near where Corrine was working. Marugame poured an extremely strong drain cleaner down the maintenance drain, releasing noxious fumes which Corrine inhaled. Corrine, who according to counsel was severely diabetic, began bleeding from the nose and the mouth. The Kauai police and fire departments ordered the Wal-Mart to be evacuated for two hours.
Bill and Corrine Apana (collectively, "Apanas") filed suit against Marugame and HMP, Inc. TIG's Mot. for Summ. J. Ex. A. HMP, Inc., was the named insured under a general commercial insurance liability policy issued by TIG for the period from February 19, 2002 to February 19, 2003. TIG's Mot. for Summ. J. Ex. B (hereinafter "Policy"). The Policy provided that TIG
will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. [TIG] will have the right and duty to defend the insured against any "suit" seeking those damages. However, [TIG] will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. [TIG] may, at [its] discretion, investigate any "occurrence" and settle any claim or "suit" that may result.
Policy § I(A)(1)(a). The Policy contained a "Total Pollution Exclusion Endorsement" which provided:1
This insurance does not apply to:
f. Pollution
(1) "Bodily injury" or "property damage" which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.
The Policy defined pollutants as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste." Policy § V(15).
Marugame and HMP, Inc., tendered requests for defense and indemnity under the Policy to TIG. TIG denied coverage based on the Total Pollution Exclusion Endorsement in the Policy. TIG also declined to tender a defense, on behalf of Marugame and HMP, Inc.
The state law claims against Marugame and HMP, Inc., were submitted to arbitration and the Apanas were awarded approximately $90,000. Corrine later passed away, apparently from unrelated causes, and Bill Apana was appointed personal representative of her estate.
The Apanas filed their original Complaint for Corrine's injuries against Marugame and HMP, Inc. in the State of Hawaii Circuit Court of the Fifth Circuit on July 2, 2003. See TIG's Mot. for Summ. J. Ex. A. Following the arbitration award against Marugame and HMP, Inc. and an assignment of its interests by HMP, Inc., Plaintiff filed the present Complaint in the State of Hawaii Circuit Court of the Fifth Circuit on November 13, 2006, alleging that TIG had a duty to defend Marugame and HMP, Inc.; that Corrine's injuries were covered under the Policy; and that TIG acted in bad faith when it denied coverage. On December 7, 2006, TIG removed the matter to this court.
TIG filed its Motion for Summary Judgment on June 20, 2007. Plaintiff filed his Memorandum in Opposition on July 20, 2007. TIG filed its Reply on July 26, 2007. The court heard oral arguments on August 6, 2007.
A party is entitled to summary judgment where there is no genuine issue of material fact. Fed.R.Civ.P. 56(c). When reviewing a motion for summary judgment, the court construes the evidence — and any dispute regarding the existence of facts — in favor of the party opposing the motion. Snead v. Metro. Prop. & Cas. Ins. Co., 237 F.3d 1080, 1086 (9th Cir. 2001). "One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Thus, summary judgment will be mandated if the nonmoving party "`fails to make a showing sufficient to establish the existence of an element essential to that party's case.'" Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir.1999) (quoting Celotex, 477 U.S. at 322, 106 S.Ct. 2548).
The court has diversity jurisdiction over Plaintiff's claims under 28 U.S.C. § 1332. Under Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), federal courts sitting in diversity cases apply federal procedural rules and substantive state law. "In the absence of controlling state law, a `federal court sitting in diversity must use its own best judgment in predicting how the state's highest court would decide the case.'" Tirona v. State Farm Mut. Auto. Ins. Co., 812 F.Supp. 1083, 1085 (D.Haw. 1993) (citations omitted). "In so doing, a federal court may be aided by looking to well-reasoned decisions from other jurisdictions." Takahashi v. Loomis Armored Car Serv., 625 F.2d 314, 316 (9th Cir.1980).
The Policy required TIG to defend Marugame and HMP, Inc., against suits seeking damages for bodily injury or property damage. Policy § I(A)(1)(a). However, TIG was not required to defend against suits alleging claims not themselves covered by the Policy. Id. The Hawaii Supreme Court recently explained an insurer's obligation to defend as
broader than the duty to pay claims and arises wherever there is the mere potential for coverage. In 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.
Accordingly, in connection with the issue of its duty to defend, [the insurer bears] the burden of proving that 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. In other words, the insurer is required to prove that it would be impossible for the claimant to prevail against the insured in the underlying lawsuit on a claim covered by the policies. Conversely, the insured's burden with respect to its motion for summary judgment is comparatively light, because it has merely to prove that a possibility of coverage exists.
Tri-S Corp. v. Western World Ins. Co., 110 Hawai`i 473, 488, 135 P.3d 82, 97 (2006) (quoting Dairy Rd. Partners v. Island Ins. Co., Ltd., 92 Hawai`i 398, 412-13, 992 P.2d 93, 107-08 (2000)) (brackets omitted; emphasis in original). TIG's refusal to defend is evaluated in light of the information it had at the time it declined to defend Marugame and HMP, Inc. against the Apanas' original state claims. See Hawaiian Ins. & Guar. Co., Ltd. v. Blanco, 72 Haw. 9, 17, 804 P.2d 876, 880 (1990), overruled on other grounds by Dairy Rd. Partners, 92 Hawai`i at 422-23, 992 P.2d at 116-17.
The court finds that the Apanas' original Complaint raised the possibility that Marugame and HMP, Inc. were entitled to indemnification and that TIG therefore had a duty to defend. See Sentinel Ins. Co., Ltd. v. First Ins. Co. of Hawai`i, Ltd., 76 Hawai`i 277, 287, 875 P.2d 894, 904 (1994). There is a deep split among state courts regarding whether Total Pollution Exclusion Endorsements preclude coverage in cases of personal injury resulting from relatively isolated inhalation or exposure to pollutants or whether such clauses only preclude coverage in cases of "traditional" environmental pollution. See Firemen's Ins. Co. v. Kline & Son Cement Repair, 474 F.Supp.2d 779, 792 nn. 5-6 (E.D.Va.2007) (); MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 73 P.3d 1205, 1209...
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