The Hawaii Intermediate Court of Appeals (ICA) determined that the AOAO's bylaws were ambiguous as to the extent of insurance coverage provided for its members. AOAO Queen Emma Gardens & Touchstone Props. v. Wai Hung Ma, 2013 Haw. App. LEXIS 192 (Haw. Ct. App. April 5, 2013).
The owners of a sixth floor unit at the Queen Emma Gardens condominium had a tenant residing in their unit. The tenant's body was found crumpled on the ground below the unit one evening. A wrongful death suit was filed against the owners, alleging they failed to warn of a defective and dangerous condition in the unit. The complaint did not specify the defective and dangerous condition.
The AOAO's bylaws provided that insurance was to be maintained for "each apartment owner" for claims "arising out of the condition of the property or activities." The AOAO had a CGL policy from Insurance Associates Inc. which "insured each individual unit owner, but only with respect to liability arising out of the ownership, maintenance or repair of that portion of the premises which is not reserved for that unit owner's exclusive use or occupancy."
When the owners tendered the wrongful death suit to Insurance Associates, a defense was provided under a reservation of rights. The insurer believed the defective and dangerous condition in the complaint could refer to a ledge outside the unit, which may have been reserved for the exclusive use or occupancy of the owners. If so, the owners would not be insureds under the AOAO's policy.
The wrongful death lawsuit was summarily adjudicated in favor of the owners. They next sought relief from the state Department of Commerce and Community Affairs (DCCA) because the AOAO had failed to purchase liability insurance for each owners' exclusive use or occupancy. The owners sought reimbursement for any costs incurred as a result of under-insurance.
The DCCA granted the motion. The DCCA found,
[T]he by-laws required liability insurance that insured each apartment owner against claims of personal injury, death and property damage, including claims arising out of the ownership, maintenance or repair of that portion of the premises reserved for the owners' exclusive use and/or occupancy.
The trial court then reversed the DCCA's decision, concluding that the DCCA clearly erred in interpreting the bylaws, which only required the AOAO to provide coverage for the common elements.
The ICA found the bylaws ambiguous. The intent of the parties was essential in resolving the ambiguity of the language of the bylaws, creating a genuine issue of material fact. The trial court's judgment was vacated and the case was remanded.
