The insureds' property was rented from the State of Hawai`i . See State Farm Fire and Cas. Ins. Co. v. Ramirez, No. 08-00557, 2010 U.S. Dist. LEXIS 5045 (D. Haw. Jan. 22, 2010). The insureds and the State were sued by neighbors for a dumpsite/landfill maintained on the property. The underlying complaint alleged the State had cited the insureds for dumping construction debris, coral debris, dredge material and black-top pieces without a permit. The underlying complaint requested orders declaring that the insureds violated City and County grading ordinances and the site was a nuisance, but no damages were sought.
The insureds' homeowners' policy with State Farm named the State as an additional insured. State Farm defended the underlying action under a reservation of rights, but then filed suit in federal court for a declaration of its coverage obligations.
The policy covered liability for claims or suits against the insureds and State "for damages because of . . . property damage . . . caused by an occurrence." "Property damage" to the property of others caused by an insured was also covered.
The district court granted State Farm's motion for summary judgment. The underlying complaint did not allege property damage. Plaintiffs were not seeking money damages for "physical damage to or destruction of their tangible property." Instead, plaintiffs sought an order requiring the insureds and the State to remove the dumpsite/landfill.
Nor were the plaintiffs seeking damages to reimburse them for remediating the property themselves. Instead, the insureds and the State were seeking to have State Farm reimburse them for any costs the incurred in remediating their own property because of actions they allegedly took. The policy excluded from coverage, however, "property damage to property currently owned by an insured" and "property damage to property rented to, occupied or used by or in the care of any insured."
Finally, the court rejected the argument that State Farm should be estopped from denying coverage because it provided a defense in the underlying case. State Farm had repeatedly informed the insureds it was providing a defense under a reservation of rights. Hawai`i case law held that an insurer could be estopped from denying coverage when an insured detrimentally relied on representations of the insurance company and such reliance was reasonable. See AIG Hawai`i Ins. Co., Inc. v. Smith, 78 Haw. 174 (1995). Here, neither the State nor the insureds had detrimentally relied on State Farm.
