The federal district court, District of Hawaii, denied the insurers' motion to dismiss a claim asserted by the insured under Nevada's unfair practices statute. Puna Geothermal Venture v. Allianz Global Risks US Ins. Co., 2019 U.S. Dist. LEXIS 211661 (D. Haw. Dec. 5, 2019).
Puna Geothermal's power plant was damaged on the Big Island when the Kilauea volcano erupted in May 2018. The plant has remained closed. The insurers denied the claim. Puna Geothermal sued the insurers, including an unfair practices claim under Nevada Revised Statutes sec. 686A.310 (1). The statute provided it was an unfair practice to misrepresent to insureds or claimants pertinent facts or policy provisions relating to any coverage at issue. The insurers argued that the unfair practices claim should be dismissed because Hawaii law, not Nevada law, applied.
The policies had a choice of law provision stating that, "[t]his policy shall be governed by the laws of the State of Nevada."
Puna Geothermal argued that ties to Nevada included the policies were purchased by a Nevada entity. The insurers argued that the policy insured property located in Hawaii, a Hawaii partnership was an insured, and the decision to deny coverage was made in a third state.
The court noted that both states applied similar principles in deciding choice of law issues. First, when interpreting a policy, both states asked what a reasonable person in the position of insured would have understood the contract to mean. Second, both states also instructed courts to interpret contracts n a manner that effectuates the intent of the parties. Third, both the Hawaii and Nevada Supreme Courts looked to California law when their own law was silent on a particular issue. Under California law, sophisticated parties would not intend that the laws of multiple jurisdictions would apply to a single controversy having its origin in a single, contract-based relationship.
These principles supported a broad interpretation of the policies' choice-of-law clauses. An ordinary person reading that the policy was governed by the laws of the State of Nevada would expect Nevada law to apply to any dispute related to the agreement.
Therefore, the court read the choice-of-law provisions in the policies broadly as providing that Nevada law applies to any claims arising out of the parties' contractual relationship even if those claims were not contract claims. The choice-of-law clauses permitted Puna Geothermal to bring an unfair practices claim based upon the Nevada statute. The insurers' motion to dismiss was denied.
