In a case related to Great Divide Ins. Co. v. Hawaiian Kamali`i, 2019 U.S. Dist. LEXIS 43106 (D. Haw. March 15, 2019) [post here], the Federal District Court for the District of Hawaii confronted issues created by a cross-claim for one of the purported insureds. United States Fire Ins. Co. v. Hawaiian Canoe Racing Ass'ns, 2019 U.S. Dist. LEXIS 55034 (D. Haw. March 29, 2019).
Similar to Great Divide, this case also involved coverage for an accident during the 2016 Pailolo Challenge Outrigger Canoe Race. In this case, US Fire filed a complaint for Declaratory Judgment against the Associations organizing the race and Mark Stevens, seeking a ruling that there was no duty to defend or indemnify. Stevens was operating an escort vessel for the race. When Stevens' hat blew off before his team reached the start line, the underlying plaintiff entered the water to retrieve the hat. Upon re-entering the boat, she was injured when her leg was caught in the vessel's propellers. She sued the Associations and Stevens.
US Fire defended all defendants, but filed its Declaratory Judgment suit. Stevens filed a cross-claim against the Associations. alleging (1) they were negligent in failing to obtain the appropriate insurance for the event, and (2) he was entitled to implied indemnification and/or equitable subrogation. The Associations moved to dismiss the cross-claim because it failed to state a claim upon which relief could be granted and was duplicative of the cross-claim Stevens filed in Great Divide and in the underlying action.
The court granted dismissal of both counts because Stevens did not adequately plead damages to support negligence. Stevens argued he had suffered monetary damages by having to pay legal fees to defend US Fire's action but such damages were not properly pled in the cross-claim. Stevens was given leave to amend.
Anticipating the amended cross-claim, the court determined that just because Stevens filed a similar cross-claim against the Association in Great Divide, it did not affect the analysis of whether the cross claim would be dismissed for failure to state a claim. The two cross-claims were not necessarily duplicative. In this case, the cross-claim arguably addressed the issue of whether the Associations were required to ensure that Stevens was covered under the policy, whereas the Great Divide cross-claim arguably addressed the issue of whether the Associations were required to ensure that Stevens was covered under the policy that Great Divide issued. Stevens had filed similar cross-claims in the underlying action, but the court could not find that they were duplicative of the instant cross-claim based upon the current record.
Considering whether the cross-claims should be stayed until the underlying action was completed, the court noted that the underlying action was filed first. Moreover, the issues related to liability for the underlying plaintiff's injury were squarely presented in the underlying action. Based upon these persuasive factors, the stay of proceedings on the cross-claim was granted. The stayed proceedings on the cross-claim were also severed from the other claims in the Declaratory Judgment action.
