Kaneshiro v. Alamo Rent-A-Car, Inc.

• Decision Date: 20 November 1995
• Docket Number: No. 95-00676 DAE.,95-00676 DAE.
• Citation: 906 F. Supp. 554
• Parties: Michael E. KANESHIRO and The Hawaiian Insurance and Guaranty Company, Ltd., Plaintiffs, v. ALAMO RENT-A-CAR, INC., Continental Insurance Company and Does 1-100, Defendants.
• Court: U.S. District Court — District of Hawaii

906 F. Supp. 554

Michael E. KANESHIRO and The Hawaiian Insurance and Guaranty Company, Ltd., Plaintiffs, v. ALAMO RENT-A-CAR, INC., Continental Insurance Company and Does 1-100, Defendants.

No. 95-00676 DAE.

United States District Court, D. Hawai`i.

November 20, 1995.^*

Keith K. Hiraoka, Roeca Louie & Hiraoka, Honolulu, HI, for Michael E. Kaneshiro, The Hawaiian Insurance and Guaranty Company, Ltd.

Judy Y. Chung, Burke Sakai McPheeters & Bordner, Honolulu, HI, for Alamo Rent-A-Car, Inc.

Steven Y. Otaguro, Lyons Brandt Cook & Hiramatsu, Honolulu, HI, Judy Y. Chung, Burke Sakai McPheeters & Bordner, Honolulu, HI, for Continental Insurance Company.

ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND GRANTING DEFENDANTS' COUNTER-MOTION FOR SUMMARY JUDGMENT

DAVID ALAN EZRA, District Judge.

The court heard Plaintiffs' Motion for Partial Summary Judgment and Defendants' Counter-Motion for Summary Judgment on November 13, 1995. Keith Hiraoka, Esq., appeared on the briefs or at the hearing on behalf of Plaintiffs Michael Kaneshiro ("Kaneshiro") and The Hawaiian Insurance & Guaranty Company, Ltd. ("HIG") (collectively "Plaintiffs"); Wayne Sakai, Esq., and Judy Chung, Esq., appeared on the briefs or at the hearing on behalf of Defendants Alamo Rent-A-Car ("Alamo") and Continental Insurance Company ("Continental") (collectively "Defendants"). After reviewing the motions and the supporting and opposing memoranda, the court DENIES Plaintiffs' Motion for Partial Summary Judgment and GRANTS Defendants' Counter-Motion for Summary Judgment.

BACKGROUND

Kaneshiro rented a 1993 Ford Aerostar from Alamo on July 19, 1993, and executed the standard rental agreement. The rental agreement provided:

IF THERE IS NO OTHER VALID AND COLLECTIBLE INSURANCE, WHETHER PRIMARY, EXCESS OR CONTINGENT, AVAILABLE TO THE RENTER OR ANY AUTHORIZED DRIVER WHILE OPERATING THE CAR, THEN ALAMO'S VEHICLE LIABILITY POLICY SHALL PAY DAMAGES NOT TO EXCEED MINIMUM LIMITS REQUIRED BY APPLICABLE STATE LAW. THIS AMENDS THE

"LIABILITY INSURANCE" PARAGRAPH ON THE REVERSE SIDE: ALL OTHER TERMS NOT IN CONFLICT WITH ABOVE REMAIN IN EFFECT.¹

See Affidavit of Michael E. Kaneshiro, Exhibit 1 (emphasis in the original). At the time of rental, Kaneshiro had a personal automobile insurance policy from HIG; Alamo was covered under a business auto insurance policy issued by Continental.

While Kaneshiro was driving the Aerostar, he was involved in an accident with a car driven by Celia Espinoza on the Kuhio Highway in Kauai. Espinoza and her husband filed a personal injury suit against Kaneshiro in the Fifth Circuit Court. See Espinoza v. Kaneshiro, Civ. No. 94-0398 ("Espinoza case"). Defendants refused to defend Kaneshiro and denied any obligation to indemnify him for his potential liability under that lawsuit. In their motion for partial summary judgment, Plaintiffs request an entry of judgment declaring that Continental has a duty to defend Kaneshiro in the Espinoza case. Defendants filed a counter-motion for summary judgment on the entry of judgment and on the complaint.

STANDARD OF REVIEW

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party has the initial burden of "identifying for the court those portions of the materials on file in the case that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)). In a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party. State Farm Fire & Casualty Co. v. Martin, 872 F.2d 319, 320 (9th Cir.1989).

Once the moving party has met its burden of demonstrating the absence of any genuine issue of material fact, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. T.W. Elec. Serv., Inc., 809 F.2d at 630; Fed.R.Civ.P. 56(e). The opposing party may not defeat a motion for summary judgment in the absence of any significant probative evidence tending to support its legal theory. Intel Corp. v. Hartford Accident & Indemnity Co., 952 F.2d 1551, 1558 (9th Cir.1991). The nonmoving party cannot stand on its pleadings, nor can it simply assert that it will be able to discredit the movant's evidence at trial. T.W. Elec. Serv., Inc., 809 F.2d at 630; Blue Ocean Preservation Soc. v. Watkins, 754 F.Supp. 1450, 1455 (D.Haw.1991); Fed. R.Civ.P. 56(e). If the nonmoving party fails to assert specific facts, beyond the mere allegations or denials in its response, summary judgment, if appropriate, shall be entered. Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 884, 110 S.Ct. 3177, 3186, 111 L.Ed.2d 695 (1990); T.W. Elec. Serv., Inc., 809 F.2d at 630; Fed.R.Civ.P. 56(e). There is no genuine issue of fact if the opposing party fails to offer evidence sufficient to establish the existence of an element essential to that party's case. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir.1994); Blue Ocean, 754 F.Supp. at 1455.

In considering a motion for summary judgment, "the court's ultimate inquiry is to determine whether the `specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec. Serv., Inc., 809 F.2d at 631 (citing Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). Inferences must be drawn in favor of the nonmoving party. T.W. Elec. Serv., Inc., 809 F.2d at 631. However, when the opposing party offers no direct evidence of a material fact, inferences may be drawn only if they are reasonable in light of the other undisputed background or contextual facts and if they are permissible under the governing substantive law. Id. at 631-32. If the factual context makes the opposing party's claim implausible, that party must come forward with more persuasive evidence than otherwise necessary to show there is a genuine issue for trial. Bator v. State of Hawaii, 39 F.3d 1021, 1026 (9th Cir.1994) (citing California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988)).

DISCUSSION

A. The Contract

Hawaii state and federal courts have long recognized that "an insurer's obligation to defend ... is broader than the duty to pay claims and arises whenever there is the mere potential for coverage." Commerce & Indus. Ins. Co. v. Bank of Hawaii, 73 Haw. 322, 325, 832 P.2d 733 (1992). 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." Standard Oil Co. of California v. Hawaiian Ins. & Guar. Co., Ltd., 65 Haw. 521, 527, 654 P.2d 1345 (1982) (citations omitted). The insurer's duty to defend its insured is contractual and the language of the policy determines the scope of insurer's duty.... Commerce & Indus. Ins. Co., 73 Haw. at 325, 832 P.2d 733. "All doubts are resolved against the insurer and in favor of the insured." Trizec Properties, Inc. v. Biltmore Constr. Co., 767 F.2d 810, 812 (11th Cir.1985) (citing 7C Appleman, Insurance Law & Practice, 99-100 (Berdal ed. 1979)). Sentinel Ins. Co. v. First Ins. Co. of Hawaii, 76 Hawai`i 277, 287, 875 P.2d 894 (1994).

Plaintiffs argue that Continental has a duty to defend and indemnify Kaneshiro because the underlying case falls within the coverage of the insurance policy. Plaintiffs contend that Kaneshiro qualifies as an "insured" under the Continental Policy² and is therefore entitled to defense and indemnification.

In response, Defendants argue that Continental's policy is not the only document which determines the rights of the parties in this action. Defendants maintain that the rental agreement trumps any claim brought under Continental's policy because the rental agreement was freely and voluntarily executed by the parties and is therefore a valid contract establishing the priority of insurance coverage.³ Defendants claim that in signing the rental agreement, Kaneshiro agreed that his personal insurance carrier would provide primary coverage. The court agrees.

Plaintiffs' reliance on "duty to defend" cases is misplaced. Plaintiffs rely heavily on the holding of Sentinel Ins. Co., 76 Hawai`i 277, 875 P.2d 894 (1994) for the proposition that the insurer had a duty to defend irrespective of the ultimate resolution. However, Sentinel Ins. Co. does not apply to the facts here because an insurer's duty to defend is contractual in nature and Kaneshiro does not have a contractual relationship with Continental.⁴ It appears that Plaintiffs would have the court disregard the rental agreement and interpret Continental's duty to defend as if (a) no rental contract existed and (b) Kaneshiro had a direct contractual relationship with Continental. This contradicts established contract law. See Restatement (Second) of Contracts, note introducing chapter 8 (1979) ("The principle of freedom of contract is itself rooted in the notion that it is in the public interest to recognize that individuals have broad powers to order their own affairs by making legally enforceable promises.").

In this case, the record indicates that Kaneshiro had the option to purchase additional coverage, but declined. The court also notes that Kaneshiro elected a "Waiver Saver" option at the time of rental, which shifted primary liability for insurance coverage to his personal insurance carrier. Plaintiffs make no allegations of fraud or duress that would invalidate the rental contract in this case.⁵ There is no...