Insurance Law Hawaii

Hawaii Federal District Court Decides Choice of Law Dispute In Insured's Favor

    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. 

    

Indiana Court Adopts Uniform, Not Site-Specific, Interpretation of Pollution Exclusion

   Where the insured faces environmental suits in several states, should the law governing the liability policy be "site-specific," meaning the law of each state in which allegations of injury or property damage arise governs the policy's interpretation, or "uniform," whereby a single state's law governs?  In Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Standard Fusee Corp., No. 49S04-1006-CV-318 (Ind., Dec. 29, 2010) (opinion here), the court favored a uniform interpretation.    

   Standard Fusee Corporation (SFC) manufactured emergency signaling flares.  The company was incorporated in Delaware and headquartered in Maryland.  SFC had operations in Maryland, Indiana, and Pennsylvania.  In 2002, SFC learned that a chemical it used in the production of flares had been discovered in groundwater samples at its former California facility.  More than 200 lawsuits were filed against SFC in California, but they were ultimately dismissed when it was determined that SFC never discharged the chemical there.  After SFC voluntarily tested its Indiana facility in 2004, however, it found potential contamination.  SFC then applied for and was granted inclusion in the state's voluntary remediation program. 

   SFC had CGL, excess and umbrella policies from various insurers.  SFC requested defense and indemnification from the insurers with respect to the proceedings in California and Indiana.  The insurers refused to provide coverage.

   SFC sued for declaratory judgment and moved for partial summary judgment, arguing that Indiana law governed the interpretation of the policies and that the insurers had a duty to defend.  The trial court granted the motion.  The Court of Appeals reversed, adopting a "site-specific" approach to choice of law, whereby Indiana law governed the interpretation of the policies with respect to the Indiana site and California law with respect to the California site.

   The Indiana Supreme Court reversed the Court of Appeals.  The uniform approach was more consistent with Indiana's choice-of-law jurisprudence and applied in cases involving multi-site, multi-state insurance policies.  In insurance contract cases, Indiana courts first attempted to determine the principal location of the insured risk.  If no such location existed, a determination was made as to which state had the most intimate contacts. 

   Here, SFC was headquartered in Maryland.  This suggested that Maryland was the principal location of the insured risk.  As the state with the most intimate contact, the court held that the substantive law of Maryland applied to the entire dispute.