CTY. OF KAUAI v. Scottsdale Ins. Co.

• Decision Date: 27 May 1999
• Docket Number: No. 21262.,21262.
• Citation: 978 P.2d 838,90 Haw. 400
• Parties: COUNTY OF KAUA`I and Admiral Insurance Co., Inc., Respondents-Plaintiffs-Appellants, v. SCOTTSDALE INSURANCE CO., INC., Petitioner-Defendant-Appellee.
• Court: Hawaii Supreme Court

978 P.2d 838

90 Haw. 400

90 Hawai`i 400

COUNTY OF KAUA`I and Admiral Insurance Co., Inc., Respondents-Plaintiffs-Appellants, v. SCOTTSDALE INSURANCE CO., INC., Petitioner-Defendant-Appellee.

No. 21262.

Supreme Court of Hawai`i.

May 27, 1999.

Glen T. Hale, on the petition, Salt Lake City, UT, for the petitioner-appellee Scottsdale Insurance Co., Inc.

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

Opinion of the Court by LEVINSON, J.

On March 22, 1999, we granted the petitioner-defendant-appellee Scottsdale Insurance Co., Inc.'s (Scottsdale) application for a writ of certiorari to review the memorandum opinion of the Intermediate Court of Appeals (ICA) in County of Kaua`i v. Scottsdale Insurance Company, Inc., 91 Hawai`i 139, 980 P.2d 1013 (App.1999) (hereinafter, the "ICA's majority opinion"). In its application, Scottsdale argues that the ICA erred in holding that a claim for relief alleging "negligent supervision" is distinguishable from "negligent entrustment" in that the former constitutes non-automobile related conduct and, therefore, falls outside of the scope of an automobile exclusion clause contained in a comprehensive law enforcement liability policy. Scottsdale argues that negligent supervision is not a distinct claim for relief in the present case, but, rather, one that arises derivatively out of the use of an automobile.

We agree with Scottsdale that the ICA's majority opinion reached an erroneous result. In contrast to the ICA's majority opinion, we hold (1) that the tort claim of "negligent supervision," asserted against the respondent-plaintiff-appellant County of Kaua`i (County), arose out of the use of a motor vehicle when the injuries complained of resulted from a motor vehicle accident, and, accordingly, (2) that the claim implicated the provisions of the automobile policy exclusion contained in Scottsdale's law enforcement policy.

Accordingly, we reverse the ICA's majority opinion and affirm the circuit court's summary judgment in favor of Scottsdale and against the County and Admiral Insurance Co., Inc. (Admiral) (collectively, "the respondents").

I. BACKGROUND

A. Factual History

On September 18, 1992, at approximately 3:30 a.m., Kaua`i Police Department (KPD) Officer Daniel Abadilla had been on duty for approximately four-and-one-half hours. While driving his patrol car on the Kaumuali`i Highway, Officer Abadilla struck and killed Gilbert Moniz. It appears that Officer Abadilla was traveling in excess of the speed limit and off of the lined portion of the road at the time of the accident. On the previous day, September 17, 1992, Officer Abadilla had worked an eight-hour shift, from 8:00 a.m. to 4:00 p.m. It is uncontested that, at the time of the accident, Officer Abadilla was acting within the course and scope of his employment with the County and was operating a vehicle owned by the County.

B. The Insurance Policies

At the time of the accident, the County was insured under a "Comprehensive Law Enforcement Liability Policy" (hereinafter, "the law enforcement policy") issued by Scottsdale. The law enforcement policy provided in relevant part that:

Scottsdale will pay on behalf of the County all sums which the County shall become legally obligated to pay as damages because of WRONGFUL ACTS which result in:

A) PERSONAL INJURY

B) BODILY INJURY

C) PROPERTY DAMAGE

caused by an OCCURRENCE and arising out of the performance of the County's duties to provide law enforcement and/or other departmentally approved activities....

....

Scottsdale shall have the right and duty to defend any suit against the County seeking damages on account of such PERSONAL INJURY, BODILY INJURY, or PROPERTY DAMAGE....

The law enforcement policy also included the following relevant exclusion:

This policy does not apply:

To BODILY INJURY or PROPERTY DAMAGE arising out of the ownership, maintenance, operation, use, loading or unloading of any (a) AUTOMOBILE ... owned by or operated by or rented or loaned to the County; (b) or to any other AUTOMOBILE ... operated by any person in the course of his employment by the County.

The County had also purchased "Excess Business Automobile Liability" coverage (hereinafter, "the excess liability policy") from Admiral for losses in excess of $300,000.00, subject to a cap of $700,000.00. The excess liability policy read in relevant part:

Admiral will indemnify the County for ultimate net loss in excess of the County's retained limit ... which the County 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 an Automobile.

C. The Underlying Lawsuits

On September 7, 1993, Moniz's widow and children filed a complaint against the County and Officer Abadilla. Specifically, the complaint alleged in relevant part:

The death of Gilbert Moniz was caused by the negligent acts of the County and Officer Abadilla. The County and Officer Abadilla were negligent in the following respects, as well as others:

....

c. The County failed to adequately protect Gilbert Moniz from the danger presented by Officer Abadilla, who was working in an unsafe condition without adequate rest and/or time between active duty shifts;

d. The County approved and/or condoned and/or required Officer Abadilla to work in an unsafe and/or unfit condition when the County knew or should have known that Officer Abadilla worked a full day's shift at the KAUA`I Police Department Gun Range prior to working a full night shift at the time of the accident e. The County failed to properly train, supervise, hire and discharge its employees and/or agents including but not limited to Officer Abadilla;

....

As a direct and proximate result of the negligence and tortious conduct of the County and Officer Abadilla, Gilbert Moniz suffered severe injuries which caused his death.

Moniz's widow and children filed a second complaint against the County and Officer Abadilla on the same day, alleging in relevant part that "the County and Officer Abadilla have been and/or are now involved in a concerted effort to cover up the true facts and circumstances surrounding the death of Gilbert Moniz...."

Upon service of the complaints filed by Moniz's widow and children, it appears that the County contacted its insurance agent, Jardine Insurance Brokers Hawaii, Inc. (Jardine). Jardine notified Scottsdale of the pending actions. Scottsdale agreed to defend the second Moniz lawsuit, but refused to defend or cover the first. Several letters among the County, Admiral, and Scottsdale, written in 1994, indicate that Scottsdale and Admiral engaged in settlement discussions regarding the first Moniz lawsuit. At one point during the settlement negotiations, Scottsdale noted in a letter, "we feel there is very little actual police liability in this case and therefore feel that our present position is quite generous."¹

The County and Moniz's widow and children settled the first lawsuit for $715,000.00. Admiral requested that Scottsdale contribute fifty percent of the $715,000.00. On May 16, 1995, Scottsdale refused Admiral's request by letter, citing the automobile exclusion in Scottsdale's policy and declaring that "it would seem readily apparent that, if there had been no automobile accident, all other allegations would be moot."

D. Procedural History

On May 15, 1996, the respondents filed the complaint against Scottsdale that gave rise to the present appeal. The complaint alleged that Scottsdale owed the County "defense and coverage" with respect to the two Moniz lawsuits because "among the factors alleged in the lawsuits to have contributed to the cause of the death of Mr. Moniz were allegations... that the police department wrongfully scheduled one of its officers for an excessive number of hours prior to the accident, causing the officer to be too fatigued to carefully carry out his duties as a patrol officer."

After filing an answer, Scottsdale moved for summary judgment on February 20, 1997. In its memorandum in support of the motion for summary judgment, Scottsdale argued that "there is no possibility that coverage exists and, consequently, the respondents' claims ... must fail." On March 17, 1997, the respondents filed a memorandum in opposition to Scottsdale's motion and a cross-motion for summary judgment.

On July 31, 1997, the circuit court entered an order granting Scottsdale's motion for summary judgment.² Final judgment was entered in favor of Scottsdale and against the respondents on December 9, 1997. The respondents filed a timely notice of appeal on January 7, 1998.

The ICA filed a memorandum opinion on January 27, 1999. The ICA's majority opinion vacated the circuit court's judgment, concluding that "Scottsdale had a duty to defend based on the `mere possibility' of coverage created by the allegations that the County overworked or failed to properly train and/or supervise Officer Abadilla." ICA's majority opinion at 16. The ICA's majority opinion grounded its holding in the proposition that

the negligent supervision claim is a separately recognized cause of action, and it is non-auto related conduct which is outside the scope of the motor vehicle exclusion clause. Therefore, "the policy should be applicable regardless of the automobile exclusion or the fact that an automobile was involved in the occurrence."

Id. (quoting United States Fidelity & Guar. Co. v. State Farm Mut. Ins. Co., 107 Ill. App.3d 190, 63 Ill.Dec. 14, 437 N.E.2d 663, 667 (1982)).

In her dissent (hereinafter, the "dissent"), Judge Watanabe noted:

... The fact that Officer Abadilla may have been overworked, tired, and improperly trained or supervised as a result of the County's negligence is irrelevant unless Officer Abadilla drove a vehicle "in a negligent manner ... and in fact inflicted injury as a result of such conduct." Hawaiian Ins. & Guar. Co. v. Chief Clerk of the First Circuit, 68 Haw. 336, 341, 713 P.2d

...