The Federal District Court for Hawaii granted Moa Insurance Services Hawaii's (Moa) motion to dismiss the insureds' complaint alleging that they had been forced to purchase worthless surplus lines policies for volcano damage. Aquilina v. Certain Underwriters at Lloyd's Syndicate #2003, 2019 U.S. Dist. LEXIS 165866 (D. Haw. Sept. 26, 2019).

    The insureds purchased surplus lines homeowners insurance policies with the assistance of two retail brokers, Pyramid Insurance Centre, Ltd., and Moa. The policies were underwritten by several syndicates of Lloyd's. Pyramid and Moa placed the policies and worked on the insureds' behalf to procure the insurance. 

    The complaint alleged a "steering scheme" through which various defendants, including Moa and Pyramid, sold surplus lines policies to the insured without complying with obligations under Hawaii law. After the Kilauea Volcano eruption, the insured were denied coverage under the policies for significant damage to their homes and properties. The complaint alleged that defendants unlawfully placed surplus lines insurance instead of more comprehensive coverage, such as was available through the Hawaii Property Insurance Association (HIPA). Selling Lloyd's policies was more lucrative to defendants. 

    One exclusion in the Lloyd's policies precluded coverage for "the peril of lava and/or lava flow causing direct or indirect physical damage or loss of use of the insured property." (Lava Exclusion). The complaint alleged that for a home located in a particularly risky Lava Zone, a homeowner's policy excluding lava coverage amounted to no coverage at all.

    Moa moved to dismiss relying primarily upon Rule 9 (b), Fed. R. Civ. P. Under Rule 9, where a party alleged fraud or mistake, a heightened pleading standard was required. A pleading had to identify the who, what, when, where, and how the misconduct harmed the plaintiff. 

    The court dismissed the insureds' complaint, as to Moa, without prejudice. The claims were based on a single deceptive and fraudulent "scheme to steer" the insureds into purchasing illusory surplus lines insurance that they would not have otherwise purchased. The complaint failed to allege specific facts plausibly giving rise to the insureds' suspicions of a "scheme.' The allegations did not address who made what specific representations or statements to the insureds and when, what representations the insureds relied on, how Lloyd's paying commissions to brokers constituted "improper kickbacks," and how the insureds were "steered" into purchasing the policies.