N. River Ins. Co. v. H.K. Constr. Corp.
| Decision Date | 22 May 2020 |
| Docket Number | Case No. 19-cv-00199-DKW-KJM |
| Citation | 462 F.Supp.3d 1080 |
| Parties | The NORTH RIVER INSURANCE COMPANY, Plaintiff, v. H.K. CONSTRUCTION CORPORATION, Defendant. |
| Court | U.S. District Court — District of Hawaii |
Richard B. Miller, David R. Harada-Stone, Tom Petrus & Miller LLLC, Honolulu, HI, for Plaintiff.
Brett R. Tobin, Sullivan Meheula Lee LLP, Honolulu, HI, for Defendant.
Derrick K. Watson, United States District Judge The North River Insurance Company (TNRIC) brought this action under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a judicial determination that, as a matter of law, TNRIC has no duty under certain insurance policies to defend or indemnify Defendant H.K. Construction Corporation (HK) for claims asserted in a lawsuit pending in the First Circuit Court, State of Hawaii. TNRIC has now moved for summary judgment, Dkt. No. 17, on the grounds that the "Subsidence and Earth Movement" exclusionary clause in HK's insurance policy precludes coverage for the claims in the underlying lawsuit against HK because the claims arise from damage caused when a landslide occurred while HK was engaged in excavation work.
Because the "Subsidence and Earth Movement" exclusion clause in question unambiguously excludes coverage for earth movement-related damage caused by natural phenomena, HK's "work or operation[s]," or any combination thereof, and because the underlying lawsuit is clearly based on claims involving such damages, TNRIC's motion, Dkt. No. 17, is GRANTED.
TNRIC issued two insurance policies to HK: a Primary Policy and an Excess Policy. TNRIC issued the Primary Policy, Dkt. No. 18-4, for the period May 1, 2016 to May 1, 2017. Dkt. No. 22, ¶ 7. TNRIC issued the Excess Policy, Dkt. No. 18-5, for the period April 14, 2016 to May 1, 2017. Dkt. No. 22, ¶ 8.
Under the Primary Policy, the relevant coverage provision is contained in Section I. In relevant part, the first paragraph of Section I states that TNRIC: (1) "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"; and (2) "will have the right and duty to defend the insured against any ‘suit’ seeking those damages." Dkt. No. 18-4 at 56.
Coverage under the Primary Policy is modified by an Endorsement containing a "SUBSIDENCE AND EARTH MOVEMENT AND EARTH PRESSURE EXCLUSION." Dkt. No. 18-4 at 98. That exclusion clause states:
Id. (emphasis added) (hereinafter the "Earth Movement Exclusion").
Under the Excess Policy, the relevant coverage terms are contained in Section I. Dkt. No. 18-5 at 12. Section I provides as follows:
On March 1, 2019, Bruce and Yulin Bingle (the "Bingles") sued HK and Edward and Teruko Nitahara for damage caused to the Bingle property (the "Underlying Lawsuit").1 See Dkt. No. 18-3. In adhering to the "complaint allegation rule" applicable where there is a question whether claims alleged in a separate lawsuit are covered under an insurance policy, see Burlington Ins. Co. v. Oceanic Design & Constr., Inc. , 383 F.3d 940, 944 (9th Cir. 2004), the following facts are taken from "within the four corners" of the Bingles' complaint. See Hart v. Ticor Title Ins. Co. , 126 Hawai'i 448, 272 P.3d 1215, 1225 n.19 (2012) (quoting Dairy Road Partners v. Island Ins. Co. , 92 Hawai'i 398, 992 P.2d 93, 112 (2000) ).2
In March 2017, the Nitaharas hired HK as the contractor for the construction of a new residence and improvements on their property in Kaneohe, Hawaii. Dkt. No. 18-3, ¶¶ 2, 5. As part of the project, HK proceeded to excavate near the boundary between the Nitahara property and the Bingle property in order to "cut the existing slope to build a retaining wall." Id. at ¶ 6. On March 3, 2017, "due to the excavation work that HK performed," the slope on the Bingle property "failed and substantial amounts of soil eroded away," causing damage to a moss rock wall and drainage easement. Id. at ¶ 7. At the time, the Bingles were selling their property, which was in escrow. As a result of the "landslide," however, the buyer declined to purchase the Bingle property. Id. at ¶¶ 8–9. HK allegedly promised the Bingles that it would restore their property but failed to do so. Id. at ¶¶ 10–11.
The Department of Planning and Permitting for the City and County of Honolulu (DPP) investigated the landslide incident and, on April 5, 2017, DPP issued a Notice of Violation to the Nitaharas and HK for failure to obtain a grading permit. Dkt. No. 18-3, ¶ 12. After HK notified TNRIC of the incident, TNRIC hired a civil engineer (Duane Lee, P.E.) to investigate the matter. Id. at ¶ 14. When Lee recommended a geotechnical evaluation, TNRIC hired Kokua Geotech, LLC (Geotech) to provide that evaluation of the Bingle property. Id. at ¶ 15. On August 17, 2017, Geotech issued its report, recommending that a soil anchor system and shotcrete facing be installed to remediate and stabilize the slope. Id. at ¶¶ 16–17. The Bingles ultimately engaged HK's civil engineer to serve as engineer of record for the remediation work and hired Prometheus Construction, as the low bid, to do the work. Id. at ¶¶ 18–22. Prometheus commenced the remediation work in January 2019. Id. at ¶ 23.
In the Underlying Lawsuit, the complaint asserts three claims against the Nitaharas and HK: (1) withdrawal of lateral support from the slope on the Nitahara property; (2) violation of Honolulu Rev. Ord. § 14.14.4A(b) by virtue of failing to obtain a grading permit; and (3) negligence. Dkt. No. 18-3, ¶¶ 25–46. The Bingles seek damages in excess of $433,000. Id. at ¶¶ 24, 40.
On August 18, 2017—over 18 months before the Underlying Action was filed—TNRIC Claims Specialist Andy Miller informed HK by letter that TNRIC would not provide coverage for HK's claim arising from the landslide incident at the Bingle property. See Dkt. No. 24-5 at 1–2, 6. Nevertheless, TNRIC is currently defending HK in the Underlying Lawsuit pursuant to a full reservation of rights under the subject insurance policies issued by TNRIC. Dkt. No. 18-2, ¶ 4.
On April 19, 2019, TNRIC filed this lawsuit against HK under the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking (1) a declaration that TNRIC has no duty under the Primary Policy or Excess Policy to "defend or indemnify HK Construction for the claims asserted against it in the Underlying Lawsuit"; and (2) reimbursement of costs and attorneys' fees incurred in bringing this action and in defending HK in the Underlying Lawsuit. Dkt. No. 1 at 10; see id. at ¶ 5. TNRIC has now moved for summary judgment on its request for declaratory relief. Dkt. No. 17.
Summary judgment under Federal Rule of Civil Procedure 56(a) is generally appropriate when the Court, viewing the record as a whole and in the light most favorable to the nonmoving party, determines that there exists no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where, as here, the party moving for summary judgment will bear the ultimate burden of proof at trial, that party "must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial." C.A.R. Transp. Brokerage Co. v. Darden Restaurants, Inc. , 213 F.3d 474, 480 (9th Cir. 2000) (citation and quotation marks omitted). In other words, TNRIC "must establish beyond controversy every essential element of its" declaratory judgment claim. See S. Cal. Gas Co. v. City of Santa Ana , 336 F.3d 885, 888 (9th Cir. 2003) ; Mavrix Photographs, LLC v. LiveJournal, Inc. ,...
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