Pflueger, Inc. v. AIU Holdings, Inc.

• Decision Date: 31 August 2022
• Docket Number: CAAP-17-0000234
• Court: Hawaii Court of Appeals
• Parties: PFLUEGER, INC., Plaintiff-Appellant, v. AIU HOLDINGS, INC., NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendants/Crossclaim Defendants-Appellees, and NOGUCHI & ASSOCIATES, INC., Defendant/Crossclaim Plaintiff-Appellee, and DOE CORPORATIONS 1-10; DOE PARTNERSHIPS 1-10; and DOE ENTITIES 1-10, Defendants.

PFLUEGER, INC., Plaintiff-Appellant, v. AIU HOLDINGS, INC., NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Defendants/Crossclaim Defendants-Appellees, and NOGUCHI & ASSOCIATES, INC., Defendant/Crossclaim Plaintiff-Appellee, and DOE CORPORATIONS 1-10; DOE PARTNERSHIPS 1-10; and DOE ENTITIES 1-10, Defendants.

No. CAAP-17-0000234

Intermediate Court of Appeals of Hawaii

August 31, 2022

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO 09-1-1326)

Lyle S. Hosoda, Kevin T. Morikone, Addison D. Bonner, Kristen A Yamamoto, for Plaintiff-Appellant.

Richard B. Miller Patricia Kehau Wall Christopher Shea Goodwin for Defendant/Crossclaim Plaintiff-Appellee.

By Wadsworth and McCullen, JJ., with Hiraoka, Presiding Judge concurring separately

SUMMARY DISPOSITION ORDER

Plaintiff-Appellant Pflueger, Inc. (Pflueger) appeals from the Circuit Court of the First Circuit's March 14, 2017 Final Judgment, which was entered in favor of Pflueger's insurance broker, Defendant/Crossclaim Plaintiff-Appellee Noguchi & Associates, Inc. (Noguchi).^[1] In its points of error on appeal, Pflueger contends that the circuit court erred in (1) granting Noguchi's motion for summary judgment, (2) denying Pflueger's motion for reconsideration, and (3) entering final judgment in favor of Noguchi.

Specifically, Pflueger argues that, "as to causation, despite the deposition testimony of Mr. Van Dina and Ms. Ngeo, there still exists a question of fact as to whether the insurer would have found coverage and ultimately covered the claim, had the subpoenas been timely tendered."

Upon careful review of the record and the briefs submitted by the parties and the issues raised, we resolve this case as discussed below, and vacate and remand.

Background

Because this case has a long history spanning approximately fourteen years, we reiterate only the facts relevant to resolving this appeal.

Subpoenas and Claims

During the relevant time, Pflueger was insured by Defendant/Crossclaim Defendant-Appellee National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union). Defendant/Crossclaim Defendant-Appellee AIU Holdings, Inc. (AIU) was National Union's "authorized representative." In May 2008, when Pflueger notified Noguchi that it had received certain federal grand jury subpoenas, Noguchi informed Pflueger that the subpoenas did not qualify as a "claim" under two insurance policies issued by National Union to Pflueger (Policies). Noguchi did not forward a claim or the subpoenas to AIU or National Union, and did not seek clarification as to whether the grand jury subpoenas were covered under the Policies. Relying on Noguchi's representations, Pflueger took no further action until its attorney submitted a demand letter tendering Pflueger's defense to National Union approximately nine months later, in February 2009.

AIU's claims analyst, Dennis Van Dina (Van Dina), responded to Pflueger's attorney in two letters dated April 29, 2009, one for each of the Policies. Van Dina concluded that Pflueger's claim was untimely, as follows:

(1) "Policy no. 052-68-49 has a Policy Period September 27, 2007 to September 27, 2008. Coverage B states that the Policy provides coverage for Claims first made against the Company or an Individual Insured during the Policy Period or Discovery Period (if applicable). The Grand Jury Subpoena was issued on May 22, 2008. Thus, the matter will be deemed to have been made on May 22, 2008. Clause 7 requires that a Claim must be both made and reported during the Policy Period or Discovery Period (if applicable) . . . . However, this matter was submitted to National Union on February 17, 2009; outside the applicable reporting periods found with Clause 7 Notice/Claim Reporting Provisions, and as amended by Endorsement #2. Therefore, coverage is precluded."

(2) "Policy no. 052-68-49^[2] [sic] has a Policy Period September 27, 2008 to September 27, 2009. Coverage B states that the Policy provides coverage for Claims first made against the Company or an Individual Insured during the Policy Period or Discovery Period (if applicable). The Grand Jury Subpoena was issued on May 22, 2008. Thus, the matter will be deemed to have been made on May 22, 2008; outside the Policy Period. Clause 7 requires that a Claim must be both made and reported during the Policy Period or Discovery Period (if applicable) .... However, this Claim was made outside the Policy Period. Therefore, coverage is precluded."

(Emphases added.) Regarding each of the Policies, Van Dina added, "assuming this matter was both made and reported as per the requirements of the Policy, the materials submitted to National Union would not constitute a Claim." Van Dina stated, "the language of the Policy requires that an indictment, information or similar document is necessary for a Claim as defined." Van Dina further stated, "National Union's preliminary coverage position is based on the information presently available[,]" and asked that Pflueger provide "any additional information . . . you feel would either cause us to review our position or would assist us in our investigation or determination[.]"

Following Van Dina's letters, Pflueger filed an action against Noguchi, AIU, and National Union. Pflueger brought negligence and negligent misrepresentation claims against Noguchi. Pflueger alleged that Noguchi failed to tender the grand jury proceeding to AIU and National Union, and that as a proximate result of Noguchi's negligence, Pflueger was denied coverage for the matter. Pflueger further alleged that Noguchi made untrue representations that the grand jury proceeding was not covered under the Policies, and that Pflueger reasonably relied on these representations in declining for a time to tender the grand jury matter directly to AIU and National Union; as a proximate result, AIU and National Union denied Pflueger's eventual tender of the grand jury matter as untimely and denied coverage.

Tiffany Ngeo's Testimony

In preparation for litigation, AIU's Senior Complex Claims Director, Tiffany Ngeo (Ngeo), was deposed. She was asked whether it was AIU's "position that there was no coverage afforded for the grand jury subpoenas, regardless of when they were reported to . . . AIU . . . ." Ngeo responded, "Well, we have two defenses. One of them for each of the policy [sic], is that it was either not made or reported within the policy. And the other defense is that the grand jury subpoenas were not a claim per the policy."

Ngeo was also asked, "Is it fair to say that [AIU's] position is that, first, there's no coverage for the grand jury subpoenas -- grand jury subpoenas under the policy; and second, even if there was coverage, they were not reported timely[?]" Ngeo responded, "the grand jury subpoenas do not meet the definition of a claim under either policy."

Van Dina's Testimony

Van Dina was also deposed and was asked, "Even if it had been made timely, it's not a covered claim; is that right?" Van Dina responded, "Right. Well, no. I'm sorry. Let me rephrase that. Not that -- it may not even constitute the definition of a claim." (Emphasis added.)

Van Dina was later asked, "[a]ssuming this claim had been reported to where you found it to be timely, would there still have be [sic] coverage under the policy?" Van Dina responded, "I do not believe, based on what I reviewed today, that -- that a claim would have been made at that time. So I would say that coverage would not be available."

Van Dina was asked again, "regardless of whether the claim was reported in May of 2008 allegedly when the insured received or was served with the subpoena or in February of 2009 when it came across your desk, your position with respect to coverage would not change?" Van Dina answered, "No." Van Dina confirmed that his position was the subpoenas were not claims under the policy.

Pflueger Settles With AIU and National Union

Following these depositions, Pflueger settled with AIU and National Union, as evinced by AIU and National Union's petition for finding of good faith settlement, which the circuit court granted, leaving the negligence claims against Noguchi to be litigated.

James Schratz's Testimony

In the meantime, Pflueger's witness, James Patrick Schratz (Schratz), was deposed. Schratz was critical of National Union, explaining that its "conduct fell below the standard of care when it failed to even research or consider contrary or supporting legal authority."

Schratz opined that "Noguchi failed to timely report the grand jury subpoenas and the Internal Revenue Service's criminal investigation as a possible claim to Defendant National Union." Noguchi also "didn't explain the pros and cons, i.e., your defense fees of 1 million may be covered and your premium may go up x percent. Let me call the carrier and ask." Instead, Noguchi "rendered an opinion as to coverage under the policy when it admitted that such a determination was to be made by the insurance company."

Noguchi's counsel questioned Schratz about whether Noguchi caused Pflueger's damages, and Schratz acknowledged that he was not asked to look at damages or retained to render any opinions regarding causation. When asked, "you have no opinion and have not been retained to express an opinion whether or not those coverage representations caused any damages to Pflueger[,]" Pflueger's counsel objected as misstating the prior testimony. Schratz then answered "coverage is still an open issue. The very fact that National Union paid [the settlement amount], they don't pay money without thinking there's a problem, but with the -- the coverage is still an open issue . . . ."

Schratz explained, "[i]f the court decides...