Relying on well established Hawaii case law that the insurer must defend unless the underlying allegations demonstrate coverage is impossible, the Hawaii Intermediate Court of Appeals vacated the Circuit Court's order granting summary judgment to the insurer.  See Island Ins. Co., Ltd. v. Arakaki, 2010 Haw. App. LEXIS 296 (Haw. Ct. App. June 16, 2010).

   The underlying plaintiff sued his partner, Arakaki, and the general partnership for improperly transferring property and assets for Arakaki's individual benefit.  The plaintiff alleged the general partnership and Arakaki breached their duty of care "by engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law."  Arakaki tendered his defense under a CGL policy with Island Insurance.  Island filed suit for a declaratory judgment on coverage obligations.  The Circuit Court granted summary judgment to Island.

   The ICA vacated the order.  First, because Arakaki's conduct was alleged to be negligent, it gave rise to an occurrence or accident within the meaning of the policy.  Second, the underlying complaint was not limited to solely alleging intentional misconduct.  Arakaki had a light burden to merely show that the policy could possibly cover the tendered claim despite the exclusion for intentional conduct.  See Tri-S Corp. v. Western World Ins. Co., 110 Haw. 473, 487-88, 135 P.3d 82, 96-97 (2006).  Island, on the other hand, had to demonstrate that it would be impossible for it to incur liability under the policy.  Island had not met this heavy burden.  Therefore, Island had a duty to defend.