Progressive Cas. Ins. Co. v. Ferguson

• Citation: 134 F.Supp.2d 1159
• Decision Date: 23 March 2001
• Docket Number: Civil No. 00-406SPK-BMK.
• Parties: PROGRESSIVE CASUALTY INSURANCE COMPANY, Plaintiff, v. Michele FERGUSON, in her capacity as personal representative of the Estate of David L. Ferguson, deceased, Defendant.
• Court: Supreme Court of Hawai'i

Page 1159

134 F.Supp.2d 1159

PROGRESSIVE CASUALTY INSURANCE COMPANY, Plaintiff, v. Michele FERGUSON, in her capacity as personal representative of the Estate of David L. Ferguson, deceased, Defendant.

Civil No. 00-406SPK-BMK.

United States District Court, D. Hawai`i.

March 23, 2001.

Richard B. Miller, Wayne H. Muraoka, Tom Petrus & Miller, Honolulu, HI, for Plaintiff.

Richard C. Monks, Century Square, Honolulu, HI, for Defendant.

ORDER

SAMUEL P. KING, Senior District Judge.

This declaratory action presents the question of whether a territorial restriction in a motor vehicle insurance policy is enforceable to deny uninsured motorist benefits to the policyholder. Although a number of jurisdictions have addressed this precise question, the issue is one of first impression in Hawaii. The parties in this action request that this Court draw upon the principles and policies underlying Hawaii insurance law to resolve the question, or, in the alternative, to certify the question to the Hawaii Supreme Court. For the reasons explained below, the Court finds the territorial restriction enforceable.

FACTUAL BACKGROUND

On February 6, 2000, an unidentified motorist collided with David Ferguson ("Ferguson") while he was operating a motorcycle in Thailand. The motorist left the scene of the accident, leaving Ferguson fatally injured. Ferguson is survived by his ex-wife and personal representative of his estate, Defendant Michele Ferguson ("Defendant"), and his two children.

Ferguson is a named insured under a motor vehicle insurance policy ("Ferguson's policy" or the "Policy") issued by Plaintiff Progressive Casualty Insurance Co. ("Progressive") in the State of Hawaii. The Policy provided, among other things, uninsured motorist ("UM") coverage of $300,000 per person and was in effect at the time of the accident. Under the Policy, Progressive would pay for damages "1. sustained by an insured person; 2. caused by accident; and 3. arising out of the ownership, maintenance, or use of an uninsured motor vehicle." Progressive Hawaii Motor Vehicle Policy (9/97) at 23, Exh. 7 to Def.'s Mot. Summ. J. (emphasis in original). Defendant filed a claim for UM benefits on Ferguson's behalf. Progressive denied the claim on the basis of a territorial restriction contained within the "General Provisions" section of the Policy, which reads as follows:

POLICY PERIOD AND TERRITORY This policy applies only to accidents and losses occurring during the policy period shown on the Declarations Page and which occur within any state, territory, or possession of the United States of America, or any province of Canada, or while a covered vehicle, non-owned vehicle, or trailer is being transported between their ports.

Id. at 41 (emphasis in original). Since Thailand is not within the territorial limits stated in the Policy, Progressive maintains it is not legally obligated to pay UM benefits to Defendant. Progressive brought this action to obtain declaratory relief to that effect.

Defendant has moved for summary judgment determination that the Policy's territorial restriction is unenforceable as a matter of law because it conflicts with Hawaii's public policy regarding UM insurance as articulated in the Hawaii Insurance Code and Hawaii case law. Defendant submits that in the alternative, if this Court were to determine that Hawaii law does not give clear guidance on the issue, a question of law should be certified to the Hawaii Supreme Court. Progressive opposes Defendant's motion for summary judgment and certification, and has filed a cross-motion for summary judgment.

STANDARD

In considering a motion for summary judgment, the Court must determine whether there is an absence of a genuine issue of material fact viewing the facts in the light most favorable to the nonmoving party. Holihan v. Lucky Stores, Inc., 87 F.3d 362, 366 (9th Cir.1996); Fed.R.Civ.P. 56(c). The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party meets that burden by showing that there is an absence of evidence to support the nonmoving party's case. Id. at 325, 106 S.Ct. 2548. Once the moving party meets its burden, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 323-24, 106 S.Ct. 2548. "[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citing First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)) (internal quotation marks omitted).

DISCUSSION

I. HAWAII INSURANCE LAW

Federal courts sitting in diversity apply state substantive law and federal procedural law. Snead v. Metropolitan Property & Casualty Ins. Co., 237 F.3d 1080, 1090 (9th Cir.2001) (citing Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965); Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). When interpreting state law, a federal court is bound by the decisions of a state's highest court. Arizona Elec. Power Coop., Inc. v. Berkeley, 59 F.3d 988, 991 (9th Cir.1995). "In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance." Id. (citing In re Kirkland, 915 F.2d 1236, 1239 (9th Cir. 1990)).

The starting point for analyzing the enforceability of the territorial restriction in Ferguson's policy is the Hawaii Insurance Code ("Insurance Code"). In regards to UM insurance, the Insurance Code states:

(b) A motor vehicle insurance policy shall include:

....

(3) With respect to any motor vehicle registered or principally garaged in this State, liability coverage provided therein or supplemental thereto, in limits for bodily injury or death set forth in paragraph (1) ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; provided that the coverage required under this paragraph shall not be applicable where any named insured in the policy shall reject the coverage in writing ....

Haw.Rev.Stat. § 431:10C-301(b)(3). Another subsection of the same statute provides:

An insurer shall offer the insured the opportunity to purchase uninsured motorist coverage and underinsured motorist coverage by offering the following options with each motor vehicle insurance policy:

(1) The option to stack uninsured motorist coverage and underinsured motorist coverage; and

(2) The option to select uninsured motorist coverage and underinsured motorist coverage, whichever is applicable, up to but not greater than the bodily injury liability coverage limits in the insured's policy.

Id. § 431:10C-301(d). The two provisions above mandate that insurers offer insured motorists the option of purchasing UM insurance. However, the Insurance Code is silent about whether territorial restrictions are valid. Thus, the Insurance Code is not dispositive of the issue at hand.

The Court turns next to Hawaii case law for guidance. The Hawaii Supreme Court has articulated rules for construing the scope and nature of insurance policies in general, and UM insurance coverage in particular. The court has instructed that insurance policies are to be interpreted according to general rules of contract construction; that is, "according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended ...." First Ins. Co. of Hawai'i, Inc. v. State, 66 Haw. 413, 423-24, 665 P.2d 648, 655 (1983) (citations omitted). Each insurance contract is to be construed according to the entirety of its terms and conditions as set forth in the policy. State Farm Mut. Auto. Ins. Co. v. Fermahin, 73 Haw. 552, 556, 836 P.2d 1074, 1077 (1992) (citing Haw.Rev.Stat. § 431:10-237). Because insurance policies are contracts of adhesion, they must be construed liberally in favor of the insured, with any ambiguities resolved against the insurer. Sturla, Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203, 209, 684 P.2d 960, 964 (1984). In addition, insurance policies are governed by statutory requirements in force such that "[w]hen the terms of an insurance contract are in conflict with statutory language, the statute must take precedence over the terms of the contract." Sol v. AIG Hawaii Ins. Co., 76 Haw. 304, 306, 875 P.2d 921, 923, recon. denied, 76 Haw. 353, 877 P.2d 890 (1994); AIG Hawai'i Ins. Co., Inc. v. Estate of Caraang, 74 Haw. 620, 633, 851 P.2d 321, 328 (1993). Most germane to this case is the principle that "`liability insurers have the same right as individuals to limit their liability, and to impose whatever conditions they please on their obligation, provided they are not in contravention of statutory inhibitions or public policy.'" First Ins., 66 Haw. at 423, 665 P.2d at 655 (quoting 6B Appleman, Insurance Law and Practice § 4255, at 40 (1979)).

The Hawaii Supreme Court also has fashioned a body of rules specifically addressing the nature and limits of UM insurance. The court regards the UM insurance statute, Haw.Rev.Stat. § 431:10C-301, as a remedial statute that is "to be construed liberally in order to accomplish the purpose for which it was enacted." Flores v. United Air Lines, Inc., 70 Haw. 1, 12, 757 P.2d 641, 647 (1988) (citations and internal quotation marks omitted). The court has consistently applied this rule in cases concerning the scope of UM coverage. A cardinal principle...