The Supreme Court’s recent decision in Allstate Ins. Co. v. Pruett, No. 26830 (Haw. Sup. Ct. June 25, 2008), addressed several issues regarding auto policies issued by AIG and Allstate.

     The facts revolved around a household consisting of a mother insured by Allstate, a daughter insured by AIG, and a minor son who was involved in a auto accident while driving his sister’s car.  Suit was filed against the minor son by parties injured in the accident.  The minor did not have a driver’s license.  Nor did he receive permission to drive the car.  AIG and Allstate filed suit against the insureds, seeking declaratory relief that there was no coverage under the policies.  The Circuit Court ruled the exclusions in both policies did not bar coverage because the phrase "any person" as used in the policies was ambiguous.  Therefore, the family was entitled to coverage under the policies.  Further, the Circuit Court awarded fees to the insureds under Haw. Rev. Stat. 431:10-242.

     Among its various rulings, the Supreme Court agreed the policies’ use of the phrase "any person" was ambiguous. On the one hand, AIG’s policy covered any "family member" for use of an auto.  On the other hand, the policy excluded liability coverage for "any person" using a vehicle without a reasonable belief that the person was entitled to do so.  AIG contended the phrase "any person" used in the exclusion included family members.  Therefore, a person would not be covered by asserting he was both "any person" and a "family member" because the terms created mutually exclusive classes. Because this created an ambiguity in AIG’s policy, the exclusion did not apply to the minor.

     The use of the phrase "any person" suffered a similar fate in Allstate’s policy. The liability portion of the policy promised to pay for all damages an "insured person" was legally obligated to pay because of bodily injury to "any person."  Yet, the Personal Injury Protection portion of the policy excluded coverage to "any person" while operating a motor vehicle without a good faith belief he is entitled to do so.  Construing the ambiguity in the insureds’ favor, the minor was an "insured person" entitled to coverage and not "any person" as stated in the PIP exclusion. 

     Finally, the Court determined the insureds were not entitled to attorney fees under Haw. Rev. Stat. 431:10-242 because of a fatal mistake in drafting the order.  The statute requires attorney fees be awarded to the insured if the insurer refuses provide coverage and is eventually ordered by a court to "pay benefits."  Here, the Circuit Court’s order merely stated coverage was afforded under the policies.  Because the Circuit Court did not order the insurer to "pay benefits," Haw. Rev. Stat. 431:10-242 was not applicable.