Court Enforces Exclusions to Marine Liability Policy
BatesCarey’s Jason P. Minkin, Jonathan A. Cipriani, and Joseph E. Tennial write about the recent decision, United States Fire Insurance Co. v. Hawaii Canoe Racing Association et al., No. 1:18-cv-00212, 2019 U.S. Dist. LEXIS 207564 (D. Haw. Nov. 27, 2019), where the U.S. District Court for the District of Hawaii found that a marine liability insurer did not have to defend or indemnify the sponsor of a canoe race in connection with a lawsuit filed by a participant who suffered serious injuries after she was struck by the propeller of a motorboat.
On September 17, 2016, Faith Ann Kalei-Imaizumi was a participant in the Pailolo Challenge, an annual 26-mile open-ocean outrigger canoe race sponsored by the Hawaiian Canoe Racing Association (“HCRA”). A motorboat had been chartered to escort her and other members of the Kihei Canoe Club (the “Canoe Club”) to their canoe in advance of the race. As she was climbing a ladder into the motorboat, the boat’s owner and captain reversed the vessel, causing one of the engine propellers to slice into her. Mrs. Kalei-Imaizumi filed suit seeking to recover for her injuries, asserting various claims of negligence and gross negligence against the HCRA, the Canoe Club, the boat’s captain and others.
HCRA’s insurer, U.S. Fire Insurance Co., filed suit seeking a declaratory judgment that it had no duty to defend or duty to indemnify HCRA, the Canoe Club, or any other parties insured under the marine liability policy issued to HCRA. The insurer argued that coverage was barred by two exclusions: one for claims for bodily injury arising out of the use of a watercraft operated or rented by any insured (“Exclusion A”), and one for claims for bodily injury arising out of the operation of any watercraft owned or chartered by an insured (“Exclusion D”).
In response, HCRA and the Canoe Club argued that Exclusion D did not apply because there was insufficient evidence that any insured had chartered the boat in question. They further argued that Exclusion A did not apply, because the claim fell into certain exceptions to that exclusion. Specifically, they argued that the claim was subject to an exception for claims falling into the protection and indemnity (“P&I”) coverage section of the policy, and to an exception for claims falling into the Charterer Endorsement section of the policy.
Ultimately, the court found in favor of the insurer, ruling that coverage was barred by Exclusions A and D. With respect to Exclusion A, the court found that the exclusion clearly applied because the claim was for bodily injury arising out of the use of operation of a watercraft rented to HCRA. The court noted that the underlying lawsuit alleged that Mrs. Kalei-Imaizumi was injured when the motorboat reversed course, and that there was no evidence to contradict that. The court further found that the motorboat had been rented by an insured. Accordingly, Exclusion A clearly applied. Further, the court found that the claim did not fall into the P&I coverage or Charterer Endorsement exceptions to Exclusion A. The P&I coverage section of the policy only applied to vessels that were specifically listed in a schedule to the policy, or that met several criteria, including that the vessel be “similar” to the vessels listed in the schedule. The motorboat was not one of the specifically listed vessels, and, among other things, was not “similar” in size and type to the canoes listed in the schedule. Accordingly, the P&I coverage exception did not apply. Further, the Charterer Endorsement did not apply, because that endorsement similarly applied only to 2 specifically listed watercraft, of which the motorboat at issue was not one. Even if it had been, the court found that coverage would be barred by an exclusion in that section for the carrying of passengers.
Finally, the court concluded that Exclusion D also barred coverage for the claim. The court noted again that the claim was for bodily injury arising out of the operation of a watercraft. The court further found that the watercraft had been chartered by an insured, i.e., the Canoe Club and/or one of its agents. The court interpreted “charterer” consistently with how that term was defined elsewhere in the policy, i.e., one who hires or rents watercraft for temporary use.
The Hawaii Canoe Racing Association decision is a straightforward example of how courts will seek to apply marine policy language to the facts of a given case. The court carefully examined the facts at issue, and applied the legal framework of Hawaii law and the policy at issue to those facts, seeking to harmonize the use of terms throughout the policy and apply the policy as a cohesive whole. The decision is thus notable not because it lays down any groundbreaking new principle or rule of law, but because it is an example of the roadmap courts will seek to follow when resolving marine liability coverage disputes.