Great Divide Ins. Co. v. Aoao Maluna Kai Estates

• Decision Date: 14 May 2007
• Docket Number: Civ. No. 05-00608 ACK-LEK.
• Citation: 492 F.Supp.2d 1216
• Court: U.S. District Court — District of Hawaii
• Parties: GREAT DIVIDE INSURANCE COMPANY, Plaintiff, v. AOAO MALUNA KAI ESTATES, Defendant.

492 F.Supp.2d 1216

GREAT DIVIDE INSURANCE COMPANY, Plaintiff, v. AOAO MALUNA KAI ESTATES, Defendant.

Civ. No. 05-00608 ACK-LEK.

United States District Court, D. Hawai`i.

May 14, 2007.

Jeffrey S. Bolender, Patrick L. Blair, Bolender & Associates, Torrance, CA, for Plaintiff.

James R. McCarty, McCarty Law Office, Lahaina, HI, for Defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DECISION

KAY, Senior District Judge.

In this case, Great Divide Insurance Company ("Great Divide") seeks a declaratory judgment that it does not owe a duty to defend or indemnify AOAO Maluna Kai Estates ("Maluna Kai"), a homeowners' association with a commercial general liability insurance policy issued by Great Divide, from an underlying claim brought by the family of a child who drowned in the swimming pool on Maluna Kai's premises. Great Divide seeks the declaratory ruling based on a swimming pool exclusion to the insurance policy.

The Court held a bench trial on April 3-4, 2007. The main issue at trial was whether, on the date of the drowning incident, the oceanside gate at the Maluna Kai pool area was self-locking, so that the swimming pool exclusion to the policy did not apply to exclude liability coverage. As discussed herein, the Court finds that the oceanside gate was self-locking at the time of the incident.

The Court makes the following findings of fact, conclusions of law, and decision. Where appropriate, findings of fact shall operate as conclusions of law, and conclusions of law shall operate as findings of fact.

I. Findings of Fact

1. AOAO Maluna Kai Estates ("Defendant" or "Maluna Kai") is an unincorporated association of members who own certain residential units located at or around 5045 Honoapiilani Road, in the City of Lahaina, County of Maui, Hawaii. See Stipulation of Undisputed Facts at ¶ 1 (Mar. 6, 2007) ("Undisputed Facts").

2. The real estate that comprises Maluna Kai is a condominium complex consisting of ten single family homes situated on approximately 2 acres of real property. Id. at ¶ 4.

3. A swimming pool is located near the rear of the mountain-side homes of Maluna Kai. Id. at ¶ 5.

4. A five foot high rock wall surrounds the perimeter of the swimming pool, and will be referred to herein as the "swimming pool perimeter wall" or "perimeter wall". Id. at ¶ 6. The swimming pool perimeter wall encloses an area which contains the following, in addition to the swimming pool: sun deck, sink, counter space, two small rooms, barbecue grill, and lounge chairs. Id. at ¶ 6. The area enclosed by the swimming pool perimeter wall will be referred to herein as the "swimming pool area."

5. At all relevant times, there were two locations in the swimming pool perimeter wall where entrance/exit ways had been built to provide access in and out of the swimming pool area. Id. at ¶ 7. At all relevant times, black metal gates consisting of vertical bars, 4 inches apart hung at the two entrance/exit ways to the swimming pool area. Id. at ¶ 8.

6. One gate to the swimming pool area is located at the edge of the section of the swimming pool area that faces the ocean. Id. at ¶ 9. This gate is referred to herein as the "oceanside gate" and is at issue in this trial.

7. The other gate to the swimming pool area is referred to herein as the "cabana gate" Id. at ¶ 10. The cabana gate is not at issue in this trial.

8. Since November 2002, David Gerlach, Sr., of Insurance Associates, Inc., has been Maluna Kai's exclusive agent for obtaining insurance. Id. at ¶ 11.¹

9. Great Divide Insurance Company ("Plaintiff" or "Great Divide") issued a commercial general liability policy to Maluna Kai for an initial policy period of November 23, 2002 to November 23, 2003. Id. at ¶ 12. In conjunction with issuance of the policy, a loss control inspection took place on February 7, 2003; the inspector did not make any recommendation regarding swimming pool gates. See Trial Transcript at 2-47.

10. The initial commercial general liability policy was renewed for two subsequent policy periods of November 23, 2003 to November 23, 2004 and November 23, 2004 to November 23, 2005. Id. The original policy and the two policy renewals contain a swimming pool fencing conditional exclusion. Id.

11. The phrase "the Policy" refers herein to the commercial general liability policy, in effect from November 23, 2004 to November 23, 2005, issued by Great Divide to Maluna Kai with a policy number of GC402788. See Exhibit 31. The Policy limits of liability are as follows: $2 million general aggregate limit; $1 million limit to any one person or organization for personal and advertising injury; $1 million limit per occurrence; $5,000 limit for medical expense for any one person. See Exhibit 31, Commercial General Liability Coverage Part Declarations.

12. The Policy affords liability coverage via a form entitled "Commercial General Liability Coverage Form" (hereinafter "CGL Form"). See Exhibit 31. The CGL Form states, in pertinent part:

[Section I.1a.] We 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. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we 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.

. . . . .

[Section I.1.b.] This insurance applies to "bodily injury" and "property damage" only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; [and] (2) The "bodily injury" or "property damage" occurs during the policy period.

. . . . .

[Section V.3.] "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

. . . . .

[Section V.13.] "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Exhibit 31, CGL Form.

13. The Policy schedules and affixes a one-page endorsement entitled "Swimming Pool Fencing Conditional Exclusion" (hereinafter "Swimming Pool Exclusion" or "Exclusion"). See Exhibit 31, Schedule of Forms and Endorsements; Exhibit 32, Swimming Pool Fencing Conditional Exclusion. That Exclusion states:

LIABILITY ENDORSEMENT

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

SWIMMING POOL FENCING CONDITIONAL EXCLUSION

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART

The following exclusion is added to Paragraph 2., Exclusions of Coverage (Section I — Coverages);

This insurance does not apply to "bodily injury", "personal and advertising injury" or medical payments arising out of the ownership, maintenance, operation or use of a swimming pool unless the swimming pool is fenced with a self-locking gate and meets or exceeds all local governing codes and regulations.

All other Terms and Conditions of this Insurance remain unchanged.

Exhibit 32, Swimming Pool Fencing Conditional Exclusion (emphasis in original). The Policy and/or Exclusion do not define "self-locking gate."

14. For purposes of this trial, the parties agree that the swimming pool, perimeter wall, and gates meet or exceed all local governing codes and regulations, as referenced in the Swimming Pool Fencing Conditional Exclusion. See, e.g., Trial Transcript at 1-122-1-123 (Plaintiffs counsel agreeing that the regulations were not an issue in this trial).

15. On and between approximately June 27, 2005 and July 15, 2005, Michelle and Faith Rogers visited Frank and Gladys Smirke, residents of Maluna Kai, unit # 6. See Undisputed Facts at ¶ 20. Faith was Michelle's two-year old daughter. Id.

16. On July 14, 2005, Faith Rogers drowned in the swimming pool of Maluna Kai. Id. at ¶ 21. She was unattended at the time of the drowning and there were no witnesses who saw her enter the pool area or the pool. Id. Rescue personnel arrived but could not revive her. Id. She was pronounced dead shortly after the arrival of rescue personnel. Id. The drowning will be referred to herein as "the incident."

17. The Rogers family, through their attorney, has contacted Great Divide directly and has made claims against Maluna Kai arising from the incident. Id. at ¶ 23. Maluna Kai has requested that Great Divide defend and indemnify the Maluna Kai association concerning said claims. Id.

18. On August 22, 2005, Great Divide sent Maluna Kai a letter in which Great Divide reserved its rights with respect to the Rogers' claim. See Exhibit 107. In the letter, Great Divide stated, "our initial investigation has revealed the swimming pool fence and self-closing / latching gate may not have been operable on the date of the loss." Id. at 1. Great Divide went on to state that "[i]n the event it is determined the [Maluna Kai] swimming pool's self-locking gate was not operable on the date of the drowning, coverage may not be available for this loss." Id. at 3.

19. No evidence indicates that Great Divide notified Maluna Kai of any potential deficiency in the swimming pool perimeter wall or gates until after the incident.

20. In the instant lawsuit, Great Divide seeks "a judicial determination of the respective rights and obligations of Great Divide and [Maluna Kai]" under the Policy. See First Amended Complaint at 14 (Apr. 11, 2006). Great Divide seeks a declaration that it owes no duty to defend or indemnify Maluna Kai for the Rogers' claims, based on Great Divide's allegation that Maluna Kai did not maintain "functioning self-locking, self-latching, or self-closing gates" at the time of the drowning. Id. at 10, 14-15.

21. At the time of the incident on July 14, 2005, the oceanside gate was not equipped with a lock that required a key, keycard, or entry of a pin number into a keypad. This finding is supported by the video and pictures taken...