The federal district court for the Northern District of California determined the proper forum for a coverage case was Hawaii, not California. Navigators Specialty Inc Co. v. Kapiolani Residential, LLC, 2018 U.S. Dist. LEXIS 47770 (N.D. Cal. March 22, 2018). 

    Albert C. Kobayashi, Inc. was the general contractor hired by developer Kapiolani Residential LLC for the ONE Ala Moana project. Dorvin D. Leis Co., Inc. was a subcontract on the project. Navigators issued an OCIP policy for the project.

    After completion of the project, residents complained of leaks from the air conditioning condensate lines. Repairs were made and Navigators agreed, subject to a reservation of rights, to advance $100,000 to the insureds to acquire parts and to reimburse for attorneys fees incurred in negotiating a resolution of claims. In February 2017, the developers, Navigators, and other parties participated in a mediation in Hawaii in attempt to reach an agreement on funding the repair work, but the mediation was unsuccessful.

    Navigators filed suit for a declaratory judgment against Kobayashi, the developer and Dorvin Leis, seeking a declaration that there was no coverage. Among other claims, Navigators alleged that the water damage was not "property damage" under the policy because the damage was caused by poor construction or the use of substandard or incorrect materials. Defendants moved to dismiss for lack of personal jurisdiction or to transfer for improper venue. 

    To secure jurisdiction, Navigators had to establish that defendants either purposefully availed themselves of the privilege of conducting activities in California or purposefully directed their activities toward California. Defendants argued they were not California corporations, had no California offices or employees, did not conduct any business in California, and all of the facts giving rise to the dispute occurred in Hawaii. Navigators responded that the developer and Kobayashi deliberately engaged in substantial contacts with California. Dorvin Leis came to California to enroll in the policy and submitted claims to Navigators' Irvine, California office. Further, the current dispute was over the construction of an insurance policy entered and performed in California.

    The court determined that Navigators had failed to show a sufficient connection between the defendants and California. The only connection was based on the developers' purchase of a single policy from Navigators' San Francisco office, defendants' enrollment in the policy, and the submission of claims to Navigators' California office. This was insufficient to establish a substantial connection to California, as required.

    Therefore, the court decided to transfer the case to the District of Hawaii instead of an outright dismissal. In a footnote, the court noted it was not deciding whether California law or Hawaii law applied in resolving the coverage dispute.