Allstate Insurance Company, an Illinois Corporation v. David A. Naai, individually

This disposition is not appropriate for publication and is not precedent*
except as provided by 9th Cir. R. 36-3.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ALLSTATE INSURANCE COMPANY,
an Illinois Corporation,
Plaintiff - Appellee,
v.
DAVID A. NAAI, individually, and as
Trustee for the Herman H.A. Naai Trust
and Trustee for the Helen Y. Naai Trust;
HERMAN H.A. NAAI TRUST, David A.
Naai; HELEN Y. NAAI TRUST, David A.
Naai,
Defendants - Appellants.
No. 10-15415
D.C. No. 1:09-cv-00350-DAE-
BMK
MEMORANDUM*
Appeal from the United States District Court
for the District of Hawaii
David A. Ezra, District Judge, Presiding
Argued and Submitted June 13, 2012
Honolulu, Hawaii
Before: SCHROEDER, CALLAHAN, and N.R. SMITH, Circuit Judges.
FILED
JUL 24 2012
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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In a tragic accident, Sherisse Thompson backed her vehicle over two
children on property owned by defendant David A. Naai, killing one of the
children and severely injuring the other. The children’s parents sued, and named
Naai as a defendant for negligently designing or constructing the property in such a
way that the resident manager’s building, and thus the parking for the building’s
visitors, was located in an area used by tenants’ children as a playground. Naai
was insured for liability through a policy issued by Plaintiff Allstate Insurance Co.
(“Allstate”), and tendered defense of the lawsuit to Allstate. Allstate filed a
declaratory relief action in district court seeking a declaration that there was no
possibility for coverage, and therefore Allstate owed Naai no defense for the
lawsuit. The district court granted summary judgment in Allstate’s favor, finding
the policy unambiguously excludes bodily injuries arising from motor vehicles.
Naai appeals. We affirm.
“Hawaii insurance law provides for a broad duty to defend arising whenever
the pleadings raise a potential for indemnification liability of the insurer to the
insured.” Burlington Ins. Co. v. Oceanic Design & Const., Inc., 383 F.3d 940, 944
(9th Cir. 2004) (citing Hawaiian Holiday Macadamia Nut Co. v. Indus. Indem.
Co., 872 P.2d 230, 233 (Haw. 1994)). “In other words, ‘[t]he duty to defend is
limited to situations where the pleadings have alleged claims for relief [that] fall

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within the terms for coverage of the insurance contract. Where pleadings fail to
allege any basis for recovery within the coverage clause, the insurer has no
obligation to defend.’” Pancakes of Haw., Inc. v. Pomare Props. Corp., 944 P.2d
83, 88 (Haw. Ct. App. 1997) (quoting Hawaiian Holiday Macadamia Nut Co., 872
P.2d at 233) (internal quotation marks omitted). The rule under Hawaiian law is
that insurance “policies are to be construed in accord with the reasonable
expectations of a layperson.” Tri-S Corp. v. W. World Ins. Co., 135 P.3d 82, 98
(Haw. 2006) (quoting Dairy Rd. Partners v. Island Ins. Co., Ltd., 992 P.2d 93, 107
(Haw. 2000)). However, “the rule is not applied without exception upon the mere
assertions of ambiguity. Rather, ambiguity is found [and the rule is followed] only
when the contract taken as a whole is reasonably subject to differing
interpretation.” Fortune v. Wong, 702 P.2d 299, 306 (Haw. 1985) (internal
citations and quotation marks omitted).
Allstate denied Naai’s demand for coverage for the underlying lawsuit based
on the policy exclusion for bodily injury “arising out of the ownership; operation;
maintenance; use; occupancy; renting; loaning; entrusting; loading or unloading”
of a motor vehicle. The district court agreed that the policy unambiguously
excluded coverage for the injuries sustained in the accident. The exclusion is not
limited to the insured’s ownership, operation, maintenance, or use of an

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automobile; by its terms it does not cover bodily injury arising out of the operation
of any motor vehicle. Naai asks the panel to read into the policy a limitation that
the exclusion only applies to an insured’s motor vehicle. However, the Hawaii
Supreme Court has been consistent in warning that “[a] court must ‘respect the
plain terms of the policy and not create ambiguity where none exists.’” Smith v.
New England Mut. Life Ins. Co., 827 P.2d 635, 638 (Haw. 1992) (quoting First Ins.
Co. of Haw. v. Hawaii, 665 P.2d 648, 655 (Haw. 1983)).
Allstate cites several cases that hold that the same or similar exclusions
unambiguously exclude coverage when the underlying injury is caused by a motor
vehicle. See Fortune, 702 P.2d at 306, Allstate Indem. Co. v. Russell, 345 F. App’x
264, 266 (9th Cir. 2009) (unpublished); Standard Mut. Ins. Co. v. Bailey, 868 F.2d
893 (7th Cir. 1989); Allstate Ins. Co. v. Keillor, 511 N.W.2d 702, 705 (Mich. Ct.
App. 1993)). Naai contends that the cases are distinguishable, because in each the
insured had some relationship with either the driver or the motor vehicle.
However, none of the cases relied on a relationship between the insured and either
the driver or the motor vehicle to find the exclusion unambiguous.
The exclusion, as written, does not reasonably allow for different
interpretations. Only by reading in a limitation—an insured person’s ownership,
operation, maintenance, or use—can the policy be interpreted to potentially

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provide coverage. The children’s injuries unquestionably arose from the operation
of a motor vehicle. Therefore, the policy unambiguously excluded coverage for
the injuries no matter who was operating the motor vehicle at the time.
Nor are we persuaded by Naai’s argument that, even if the policy
unambiguously excludes coverage for the accident, he had a reasonable
expectation of coverage that must be honored. The Hawaii Supreme Court has
been consistent in finding similar automobile exclusions unambiguous and
effective to bar coverage. See Oahu Transit Servs., Inc. v. Northfield Ins. Co., 112
P.3d 717, 722-24 (Haw. 2005). Naai offers no explanation of how his expectation
of coverage could be deemed reasonable given that the policy unambiguously
excludes coverage.
AFFIRMED.

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