The homeowners sued their contractor, alleging the contractor had defectively constructed and failed to complete their home. State Farm Fire and Casualty Co. v. Vogelgesang, 2011 U.S. Dist. LEXIS 72618 (D. Haw. July 6, 2011). The homeowners' complaint pled, among other things, damage caused by breach of contract and negligence. State Farm agreed to defend under a reservation of rights.
State Farm filed suit in federal court for declaratory relief. Judge Mollway granted State Farm's motion for summary judgment. Relying on the Hawaii Intermediate Court of Appeal's decision in Group Builders, Inc. v. Admiral Ins. Co., 123 Haw. 142, 231 P.3d 67 (Haw. Ct. App. 2010), Judge Mollway determined that the claims asserted in the underlying litigation arose from the contractor's alleged breach of contract. Group Builders held that breach of contract claims based on allegations of shoddy performance were not covered under CGL policies.
Turning to the negligence claim, the underlying suit alleged the contractor breached its duties to the homeowners "by failing to finish the residence in a timely manner, and by failing to achieve high-grade quality for the residence." Claiming that the contractor failed to finish the residence in a timely and workmanlike manner was not an independent cause of action, but instead a restatement of the breach of contract claim.
The court also considered the impact of H.B. 924, the recently enacted legislation which provided,"the meaning of the term 'occurrence' shall be construed in accordance with the law as it existed at the time that the insurance policy was issued." The contractor folded by agreeing with State Farm that this legislation did not affect the motion for summary judgment. The court stated that none of the relevant cases decided before the policy was issued in 2006 suggested that the homeowners' contract claims warranted coverage.
Thanks to our Damon Key summer law associate, Kumau Pineda-Akiona, for alerting me to this case.
