In 1997, the Hawaii Intermediate Court of Appeals (ICA) decided Pancakes of Hawaii, Inc. v. Pomare Prop. Corp., 85 Haw. 286, 944 P.2d 83 (Haw. Ct. App. 1997). Although not an insurance coverage case, Pancakes addressed the duty to defend in terms of a contractual indemnity obligation. Under challenge in a recent appeal before the ICA, the Court reaffirmed the holding in Pancakes. Arthur v. State of Hawaii, Dept. of Hawaiian Home Lands, 2015 Haw. App. LEXIS 109 (Haw. Ct. App. Feb. 27, 2015).
The decision is long with detailed facts and many indemnities running in favor of various parties. This post focuses on the decision's discussion of Pancakes.
A resident, Mona Arthur, of the Kalawahine Streamside Housing Development, was killed when she apparently slipped and fell from a hillside adjacent to the project. She was on the hillside tending to her garden there. At the bottom of the hill was a two foot fence in front of a drainage ditch, where Mona allegedly hit her head.
Mona's husband, William Arthur, sued a variety of defendants including the Department of Hawaiian Home Lands (DHHL), the fee owner; Kamehameha Investment Corporation (KIC), the developer; Design Partners, the architect; Coastal Construction Company, the general contractor for the project housing; the AOAO, who reviewed and controlled the design and development of each property; and Sato and Associates, the civil engineer who prepared the construction plans. William alleged the defendants were negligent in the design, construction, and supervision of the construction of the hillside area. Subsequently, Kiewit Pacific Company, the general contractor, and Pacific Fence, the subcontractor who built the fence, were brought in as third-party defendants.
One of the numerous indemnities in the case ran from Sato to KIC, under which Sato agreed to indemnify, defend and hold harmless KIC for all claims, demands, losses, etc.
Eventually, the circuit court granted KIC's motion for partial summary judgment against Sato and Kiewit, relying on Pancakes. In its motion for summary judgment, KIC had argued that Sato and Kiewit's duty to defend was determined at the outset of the litigation based upon the complaint allegation rule in Pancakes. The court found that Sato had a joint and several duty to defend KIC.
Sato appealed, arguing, in part, that Pancakes was wrongly decided. Sato argued that it could not be held liable for defense costs or indemnity obligations to KIC until wrongful conduct on Sato's part was shown to have occurred.
Pancakes held that the law governing the duty of an insurer to defend its insured under indemnity provisions of an insurance contract applied to an indemnitor's duty to defend an indemnitee under a general indemnity contract. The ICA rejected Sato's contention that its duty to defend was not triggered until wrongful conduct by Sato was shown to have occurred and was causally related to claims asserted by William. Instead, Sato's duty to defend KIC was triggered upon the filing of the complaint and/or the tender of KIC's defense to Sato. Further, the duty encompassed all claims that could potentially come within the scope of the indemnity.
Sato also argued the indemnification provision in its contract was void as against public policy under Haw. Rev. Stat. 431:10-222 because William's complaint did not allege that Mona's injuries were solely the result of KIC's negligence. The statute established that an indemnity provision seeking to indemnify against liability for bodily injury caused by the sole negligence of the promisee was invalid as against public policy.
Here, Haw. Rev. Stat. 431:10-222 did not bar Sato's duty to defend, and possibly to indemnify, because Sato, as well as other defendants, were alleged to have been negligent. Sato's duty to defend KIC included all claims potentially arising under the Sato Contract and not only for those arising from Sato's negligence. Therefore, the indemnity provision was not void under Haw. Rev. Stat. 431:10-222.
