Government Employees Ins. Co. v. Dizol

Decision Date30 November 2001
Docket NumberNo. CIV. 94-977 ACK.,CIV. 94-977 ACK.
Citation176 F.Supp.2d 1005
PartiesGOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff, v. Alexander DIZOL, Special Administrator of the Estate of Kevin Tate Dizol, deceased, Defendant.
CourtU.S. District Court — District of Hawaii

John T. Hassler, Miyagi Nohr & Myhre, Anthony Y K Kim, Stephen K Roy, Honolulu, HI, for plaintiff.

James Ireijo, Cool, CA, for defendant.


KAY, District Judge.


This insurance coverage case arises out of a one-car accident on September 14, 1991 on the island of Hawaii. Kevin Dizol was a passenger in a van driven by Vernell Adams. Just prior to the accident, Adams was drinking at the Highlands Bar & Grill ("Highlands").

The Court addresses two motions in this Order. First, Alexander Dizol, Special Administrator of the Estate of Kevin Tate Dizol, deceased ("Defendant"), moves to dismiss the complaint of Government Employees Insurance Company ("Plaintiff") and/or for summary judgment. Second, Plaintiff moves for summary judgment.

At the time of the accident, the van Adams drove was insured by Fireman's Fund Insurance Company of Hawaii, Inc. ("Fireman's Fund") with bodily injury liability limits of $35,000 per person. Highlands was also insured by Fireman's Fund. In 1993, Defendant filed suits in Hawaii state court against both Highlands (under a dram shop theory) and Adams's estate. On November 10, 1994, Defendant settled with Highlands and Fireman's Fund for $255,000. The limit of Highlands' policy was $1 million. On that date or sometime soon after, Defendant received from Fireman's Fund $35,000 on behalf of Adams.1 On April 24, 1995, Defendant dismissed with prejudice his suits against Adams and Highlands. Defendant also received no-fault benefits of $15,000 on February 25, 1992 and underinsured motorist benefits of $35,000 (policy limit) from USAA Insurance Company on December 21, 1994. In total, Defendant has received $340,000. According to an economist retained by Defendant, the deceased's projected loss of earnings is $357,177. No other evidence of damages is before the Court.

On the date of the accident, Harvey Dizol, the deceased's brother, was insured under a policy issued by Plaintiff (the "Policy") which included underinsured motorist ("UIM") coverage of $70,000. The Policy has a "relative resident" clause whereby relatives living in the policyholder's household are insured. See Def. Mot. Dis., Ex. A, at 10. Under "LOSSES WE PAY," the Policy states:

We will pay damages an insured is legally entitled to recover for bodily injury caused by accident and arising out of the ownership, maintenance or use of an underinsured motor vehicle. However, we will not pay until the total of all bodily injury liability insurance available has been exhausted by payment of judgments or settlements.

See id. at 11 (emphasis in original). The Policy also has a "consent-to-settle" clause:

This coverage does not apply to bodily injury to an insured if the insured or his legal representative has made a settlement or has been awarded a judgment of his claim without our prior written consent.

Id. (emphasis in original). It is undisputed that the settlements with Adams and Highlands were made without Plaintiff's prior written consent.

Defendant first made a demand for UIM insurance on August 12, 1994. See Pl. Mot. SJ, Ex. B, F, G. Jeffrey A. Todd was assigned to be the claims examiner. See Pl. Mot. SJ, Aff. Jeffrey A. Todd ¶¶ 3, 5 ("Todd Aff."). Todd was to investigate, inter alia, whether the deceased was a "relative resident" of Harvey Dizol's household. See id. ¶ 6. Todd wrote Defendant a letter acknowledging the claim had been made on August 18, 1994.

Please note that your letter was the first notice we have received of this loss. At this time I have requested policy information from the mainland due to the fact that this loss occurred approximately three years ago. ... Please advise how much coverage is available under the Highland's Bar and Grill policy. In your letter you noted that the trial date has yet to be set. Please advise what the status is in regards to the suit and whether all necessary depositions have been taken.

Pl. Mot. SJ., Ex. H (emphasis added). Also on August 18, 1994, Todd discovered from Fireman's Fund representatives that, inter alia, suit had been filed against Adams "some years ago" but that the status of the lawsuit was unclear. Fireman's Fund also informed Todd that it had tendered, but Defendant had not then accepted, $35,000 representing a full pay out of benefits for the policy held by Adams. See Todd Aff. ¶ 8.

On September 27, 1994, Defendant's present counsel (James Ireijo) told Todd that "DIZOL had settled his claims against ADAMS and HIGHLANDS for the respective sums of $35,000.00 and $255,000.00; (b) HIGHLANDS had liability limits of one million dollars; and (c) DIZOL would be looking to obtain UIM benefits regardless of that settlement." Todd Aff. ¶ 10.2 Todd also avers that upon learning this conversation with Ireijo, he "immediately called [Plaintiff's former attorney Carleton Reid] (that same day) and sent him the claims file for his review and future handling." Id. ¶ 11.

On October 3, 1994, Reid wrote Todd and suggested that he investigate whether Kevin Dizol truly resided with the policyholder. See Opp. Pl. Mot. SJ, Ex. B. He also wrote:

It is ... unclear if the Estate of Kevin Dizol has already accepted the entire amount of bodily injury liability coverage available to Vernell Adams.... Mr. Fitzgerald's August 12, 1994 letter seems to suggest that a settlement has already been reached with Mr. Adams .... If there has been a settlement with Vernell Adams, such may be a violation of your policy where you have a right to withhold consent to a settlement where your interests would not be protected. If a settlement has not yet been reached, you might wish to intervene in the pending action or make it clear to the Estate of Kevin Dizol's attorney that you will not consent to any settlement that releases Mr. Adams for his available policy coverage.

Id. (emphasis added). Despite Reid's suggestion, Plaintiff did not move to intervene in the underlying state tort case. According to Ireijo, he did not receive any objection to the pending settlements before late November of 1994.

On November 28, 1994, Reid wrote Ireijo, (1) requesting information about the deceased's status as a "resident relative" and whether he had any other insurance coverage; (2) stating that if there had been a settlement with Adams, it was without the Plaintiff's consent and could mean that there was no UIM coverage available because of the policy violation; and (3) stating:

If and when you wish to settle with Mr. Adams for his available policy limits, please advise me of such and the details surrounding your desire to do so. My suspicion is that you have not yet settled with Mr. Adams because of the "joint tortfeasor act" where you are pursuing the "deep pocket" liquor establishment. If my assumption is incorrect, please advise me of such and the status of the Estate's circuit court claims for bodily injury.

Pl. Mot. SJ., Ex. J.

On December 1, 1994, Ireijo telephoned Reid and informed him that Defendant had settled his claim with Highlands for $255,000. This was the first Reid (but not Plaintiff) knew of the settlement. See Reply Pl. Mot. SJ, at 2. On December 2, 1994, Ireijo wrote Reid a letter informing him that Defendant had released Highlands and that he planned to settle with Adams shortly. See Pl. Mot. SJ., Ex. K.

On December 29, 1994, Plaintiff filed the instant lawsuit under the Declaratory Judgment Act, 28 U.S.C. § 2201-02 (1994) ("DJA"). Plaintiff sought a declaration that Defendant is not entitled to collect under the Policy because he breached the consent-to-settle clause. Alternatively, Plaintiff requested a set off against Defendant's damages of either: 1) the full amount of bodily injury coverage available to Adams and Highlands, or 2) the full amount of payments received by Defendant.

On August 22, 1995, Plaintiff filed a motion for summary judgment. This Court granted the motion after finding that Defendant breached the consent-to-settle clause. See Order Granting Plaintiff's Motion for Summary Judgment, at 4, 14 (filed Nov. 9, 1995) ("1995 SJ Order"). The Court rejected Defendant's estoppel/laches/waiver arguments based on Plaintiff's alleged untimely objection to the settlement with Highlands. Id. at 10-13.3 The Court denied Defendant's motion for reconsideration.

Defendant appealed. The Ninth Circuit vacated and remanded the 1995 Summary Judgment order because this Court had not sua sponte determined whether it was "appropriate" to exercise its discretionary jurisdiction under the DJA. See Government Employees Ins. Co. v. Dizol, 108 F.3d 999, 1004, 1010, 1012 (9th Cir.1997), vacated, 133 F.3d 1220 (9th Cir.1998) ("GEICO (Panel)"). This Court had not examined the DJA issue as no parties had raised it.

The panel's opinion was reversed by the Ninth Circuit sitting en banc. See Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222-23 (9th Cir.1998) (en banc) ("GEICO (En Banc)"). The en banc court held that "when a district court has constitutional and statutory jurisdiction to hear a case brought pursuant to the [DJA], the district court may entertain the action without sua sponte addressing whether jurisdiction should be declined." Id. at 1224. The en banc court vacated the panel opinion and returned control of the case to the panel for resolution of the appeal on the merits. See id. at 1227. The panel again vacated this Court's entry of summary judgment. It remanded the case with instructions to reconsider the 1995 Summary Judgment Order in light of the ...

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