U.S. Fire Ins. Co. v. Prieto

Decision Date18 June 2020
Docket NumberCIVIL NO. 19-00186 JAO-RT
PartiesUNITED STATES FIRE INSURANCE COMPANY, Plaintiff, v. NICHOLAS PRIETO, Defendant.
CourtUnited States District Courts. 9th Circuit. United States District Court (Hawaii)
ORDER (1) DENYING WITHOUT PREJUDICE PLAINTIFF UNITED STATES FIRE INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT AND (2) STAYING ACTION

In this declaratory action, Plaintiff United States Fire Insurance Company ("Plaintiff") seeks a determination that it has no duty to indemnify Defendant Nicholas Prieto ("Defendant") under the applicable Homeowners Protection Plan Special Policy ("Policy") for the claims asserted against Defendant in Aerica Cates, Individually and as Guardian Prochein Ami for Jane Doe v. State of Hawaii, et al., Civil No. 18-1-0124 JKW (Haw. 5th Cir. Ct.). Plaintiff requests summary judgment on the basis that Defendant is not entitled to coverage and the Policy does not provide coverage for punitive damages. For the following reasons, the Court hereby DENIES WITHOUT PREJUDICE Plaintiff's Motion for Summary Judgment, ECF No. 21, and STAYS this action.

BACKGROUND
I. Factual History
A. Underlying Action

On August 28, 2018, Aerica Cates ("Cates") filed an action against Defendant and the State of Hawai'i in the Circuit Court for the Fifth Circuit, State of Hawai'i. Cates and Defendant were in a relationship and share a daughter, Jane Doe. Pl.'s Concise Statement of Facts ("CSF") Ex. A, ECF No. 22-3 ¶¶ 5-6. Cates alleges that following their separation, Defendant sexually abused Jane Doe during unsupervised visits. Id. ¶¶ 7-9, 21, 38. Cates accuses the State, through Child Protective Services ("CPS") and Child Welfare Services ("CWS"), of failing to take appropriate action following Jane Doe's pediatrician's reports of abuse and forcing Jane Doe to resume visitation with Defendant. Id. ¶¶ 10-20, 22-29.

Cates asserts the following claims against Defendant: assault and battery; intentional infliction of emotional distress; negligent infliction of emotional distress; and negligence. Id. at 8-9. Cates also prays for general, special, and punitive damages; costs and attorneys' fees; pre- and post-judgment interest; and other just and appropriate relief. Id. at 10.

On March 7, 2019, the State filed a cross-claim against Defendant, asserting that any injuries and/or damages sustained by Cates were the result of Defendant's wrongful acts and/or omissions, and not the result of the State's negligence, wrongful acts, and/or omissions. Pl.'s CSF, ECF No. 22 ¶ 20; Pl.'s CSF Ex. B, ECF No. 22-4 at 8-9 ("State Cross-Claim") ¶ 2. The State additionally avers that Defendant's acts were primary, while its negligence, "if any, was passive and secondary[.]" Pl.'s CSF ¶ 20; State Cross-Claim ¶ 3. Due to its purported lack of culpability, the State seeks defense, indemnification, contribution, and/or reimbursement from Defendant. Pl.'s CSF ¶ 20; State Cross-Claim ¶¶ 2-3.

By letter dated April 5, 2019, Plaintiff's counsel informed Defendant that it would defend him in the underlying lawsuit pursuant to a full reservation of rights under the Policy. Pl.'s CSF ¶ 21; Decl. of Counsel, Richard Miller ("Miller Decl."), ECF No. 22-1 ¶ 6.

B. The Policy

Defendant is the named insured of the Policy for the period October 5, 2015 to October 5, 2016, insuring the property located at 2760 Ohana Aina Place, Kalaheo, HI 96741. Pl.'s CSF ¶ 22; Ex. C, ECF No. 22-5 at 5. The Policy contains the following pertinent definitions:

1. "Bodily injury" means bodily harm, sickness or disease, including required care, loss of services and death that results.
2. "Personal injury" means any injury arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment or malicious prosecution; or
b. Libel, slander or defamation of character; or
c. Invasion of privacy, wrongful eviction or wrongful entry.
. . . .
7. "Property damage" means physical injury to, destruction of, or loss of use of tangible property.

Pl.'s CSF ¶ 23; Ex. C at 12-13. The Policy's personal liability coverage provision states:

SECTION II - LIABILITY COVERAGES

COVERAGE E - PERSONAL LIABILITY
If a claim is made or a suit is brought against an insured for damages because of bodily injury, personal injury, or property damage caused by an occurrence to which this coverage applies, we will:
1. Pay up to our limit of liability for the damages for which the insured is legally liable; and
2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the occurrence equals our limit of liability.

Pl.'s CSF ¶ 23; Ex. C at 25. Applicable here, the Policy contains the following exclusions:

SECTION II - EXCLUSIONS

1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to bodily injury, personal injury, or property damage:
a. Which is expected or intended by the insured[.]

Pl.'s CSF ¶ 23; Ex. C at 26. The special provisions portion of the Policy alters certain of the aforementioned provisions. It deletes subsection 1 of the personal liability provision and replaces the definition of "occurrence"1 with the following:

6. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:
a. Bodily injury
b. Personal injury; or
c. Property damage.

Pl.'s CSF ¶ 23; Ex. C at 42-43. The Policy's exclusions section in the supplemental provisions states:

Under item 1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others, items a., b. and e. are deleted and replaced by the following in all forms.
a. Arising out of:
(1) An intentional or criminal act by the insured; and
(2) The bodily injury, personal injury, or property damage could reasonably be expected to result from the act.
However, this exclusion does not apply to an act of assault and/or battery if committed to protect persons or property.

Pl.'s CSF ¶ 23; Ex. C at 45.

II. Procedural History

Plaintiff commenced this action on April 11, 2019 seeking a declaration pursuant to 28 U.S.C. § 2201 that under the Policy, it has no duty to defend or indemnify Defendant in the underlying action. Compl. ¶ 4.

On March 9, 2020, Plaintiff filed the present Motion.

LEGAL STANDARD

Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). "A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions ofthe pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)); see T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). In a motion for summary judgment, the Court must view the facts in the light most favorable to the nonmoving party. See State Farm Fire & Cas. 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. See T.W. Elec., 809 F.2d at 630; Fed. R. Civ. P. 56(c). 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. See Intel Corp. v. Hartford Accident & Indem. 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. See T.W. Elec., 809 F.2d at 630; Blue Ocean Pres. Soc'y v. Watkins, 754 F. Supp. 1450, 1455 (D. Haw. 1991).

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. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 884 (1990); 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. See Celotex, 477 U.S. at 322; Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir. 1994) (citing id.); Blue Ocean, 754 F. Supp. at 1455 (same).

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., 809 F.2d at 631 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)) (footnote omitted). Inferences must be drawn in favor of the nonmoving party. See id. 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. See 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. See Bator v. Hawaii, 39 F.3d 1021, 1026 (9th Cir. 1994) (citing Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987)).

DISCUSSION

Plaintiff seeks a declaration that it has no duty to defend or indemnify Defendant on three grounds: (1) the underlying lawsuit does not involve a "bodily injury," "property damage," or "personal injury" caused by an "occurrence"; (2) coverage is precluded by the Policy's exclusion for...

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