Group Builders, Inc. v. Admiral Insurance Co.

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAfI

---oOo--z
GROUP BUILDERS, INC. and TRADEWIND INSURANCE COMPANY, LTD.,
Plaintiffs/Counterc1aim Defendants-
Appellants/Cross-Appel1ees,
v.
ADMIRAL INSURANCE COMPANY,
Defendant/Counterclaimant/Cross-Claimant-
Appellee/Cross-Appellant, _
and
NATIONAL INTERSTATE INSURANCE COMPANY;
SERVCO INSURANCE SERVICES CORP., fOrmerly

known as and/or doing business as American
Inc. and American Insurance Agency;

Insurance Agency,
NATIONAL INTERSTATE INSURANCE COMPANY OF HAWAII, INC.,
Defendants-Appellees/Cross-Appellants,
and
ZURICH AMERICAN INSURANCE COMPANY,
Defendant/Cross-Claim Defendant-Appellee

=@ #@‘@' ec xvwe:az

,9’1

NO. 29402

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 05-1-2204)

MAY l9, 2010

FOLEY, PRESIDING J., FUJISE AND REIFURTH, JJ.

OPINION OF THE COURT BY FOLEY, J.

In a case arising out of an insurance dispute,

Plaintiffs/Counterclaim Defendants-Appellants/Cross-Appellees
and Tradewind Insurance Company,

Inc. (Group)
appeal from the

Group Builders,
(collectively,

Ltd. (Tradewind)

"Order Granting Plaintiffs' Motion for (l) Rule 54(b)
(2) with Respect to the Order

Plaintiffs)

Certification Re various Orders or,

Granting Defendant Admiral Insurance Company's Motion for Partial
in the Alternative,

(3) for a Stay of
2008"

Summary Judgment Re: No Duty to Indemnify,

for Leave to File an Interlocutory Appeal,
Filed on September 3,

and

These Proceedings Pending Appeal,

QE"H.+J

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

filed on October 3, 2008 in the Circuit Court of the First
Circuitl (circuit court).

The instant appeal originally consisted of (l)
Plaintiffs' appeal from six circuit court orders; (2) a cross-
appeal of Defendants-Appellees/Cross-Appellants National
Interstate Insurance Company (National Interstate), National
Interstate Insurance Company of Hawaii (National Interstate of
Hawaii), and Servco Insurance Services Corp. (Servco) from three
circuit court orders; and (3) a cross-appeal of Defendant/
Counterclaimant/Cross-Claimant-Appellee/Cross-Appellant Admiral
Insurance Company (Admiral) from a separate order.

In this court's February l2, 2009 "Order Partially
Dismissing Appeal and Completely Dismissing All Cross-Appeals,"

-we dismissed for lack of jurisdiction all of the cross-appeals

and Plaintiffs' appeal from the various orders except for
Plaintiffs' appeal of the circuit court's September 23, 2008
"Order Granting Defendant Admiral Insurance Company's Motion for
Partial Summary Judgment Re: No Duty to Indemnify, Filed on

June 25, 2008" (Order Granting Admiral's MPSJ). We concluded
that this order had been properly certified for interlocutory
appeal pursuant to HRS § 641-l(b) (l993 & Supp. 2009).

On appeal, Plaintiffs' sole point of error is that the
circuit court erred in holding there was no genuine issue of
material fact and in dismissing the claims for Admiral's breach
of its duty to indemnify Group, as a matter of law.

we disagree with Plaintiffs' point of error and affirm`
the circuit court's Order Granting Admiral's MPSJ.

I.

Hilton Hotels Corporation (HHC) is the parent of Hilton
Hawaiian Village, LLC (HHV). By contract dated August 2, l999,
HHC employed Hawaiian Dredging as the general contractor for

construction of the Kalia Tower (Tower) that was to be built as

1 The Honorable Glenn J. Kim presided.

2

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

part of the Hilton Hawaiian Village in Waikiki, Honolulu,
Hawafi. Hawaiian Dredging subcontracted Group to install an
exterior insulation finishing system and sealant, spray-applied
fireproofing, building insulation, and metal wall framing on the
Tower. 0

From October 1, 2000 to December 1, 2000, Admiral
provided Group with commercial general liability (CGL) insurance
coverage.2

After construction on the Tower had been completed, the
Tower guest rooms were opened to the public in May 200l._ In mid-
2002, extensive mold growth was discovered in the guest rooms.
On July 24, 2002, HHC and HHV closed the guest rooms on floors 5
through 25 of the Tower for remediation. An investigation
revealed numerous material defects in the design and construction
of the Tower. Some of these defects substantially contributed to
or caused the mold growth. 7

HHC and HHV filed suit in 2003 against numerous
defendants, including Group, for the construction defects and
closure of the Tower (Tower lawsuit). In their complaint, HHC
and HHV alleged five causes of action against Group: (1) breach'
of contract, (2) breach of the covenant of good faith and fair
dealing, (3) negligence, (4) breach of express and implied
warranties, and (5) negligent misrepresentation. After receiving
notice of the lawsuit, Admiral refused to defend, indemnify,.or
otherwise provide insurance coverage to Group for the claims
asserted in the Tower lawsuit,

A settlement as to HHC and HHV's claims was reached
involving Tradewind, Group, Defendant/Cross-Claim Defendant-
Appellee Zurich American Insurance Co. (Zurich), and Fireman's

Fund Insurance Company of Hawaii, Inc. (Fireman's Fund). In

2 From October l, 1999 to October l, 2000, Tradewind provided Group
with CGL and commercial umbrella insurance. After December 1, 2000, Group
maintained several insurance policies with Defendant zurich American Insurance
Co. and Fireman's Fund Insurance Company of Hawaii, Inc.

3

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

connection with the settlement, Group assigned its claims against
Admiral, as well as the right to sue in Group's name, to
Tradewind.

On December 13, 2005, Plaintiffs filed a complaint, On
May 30, 2006, Plaintiffs filed a First Amended Complaint against,
inter alia, Admiral3 for its refusal to defend, indemnify, or
otherwise provide insurance coverage to Group for the claims
asserted in the Tower lawsuit. 1

In the course of the proceedings, Admiral filed a
"Motion for Partial Summary Judgment Re: No Duty to Indemnify" on
June 25, 2008 (Admiral's MPSJ). Plaintiffs opposed the motion.
The circuit court granted Admiral's MPSJ.

On September 3, 2008, Plaintiffs filed a "Motion for
(l) Rule 54(b) Certification Re: various Orders or, (2) with
Respect to the Order Granting Defendant Admiral Insurance
Company's Motion for Partial Summary Judgment Re: No Duty to
Indemnify, in the Alternative, for Leave to File an Interlocutory
Appeal, and (3) for a Stay of These Proceedings Pending Appeal."
The circuit court granted this motion, directing entry of final
judgment as to various orders and certifying the Order Granting
Admiral's MPSJ for interlocutory appeal under Hawaii Revised

Statutes (HRS) § 641-l(b).“

3 Plaintiffs also named Servco, formerly known as and/or doing business
as American Insurance Agency, Inc. and American Insurance Agency; National
Interstate; National Interstate of Hawaii; and Zurich as defendants.

4 HRS § 641-l(b) authorizes interlocutory appeals to this court under
the following circumstances:

(b) Upon application made within the time provided by the
rules of court, an appeal in a civil matter may be allowed by a
circuit court in its discretion from an order denying a motion to
dismiss or from any interlocutory judgment, order, or decree
whenever the circuit court thinks the same advisable for the
speedy termination of litigation before it. The refusal of the
circuit court to allow an appeal from an interlocutory judgment,
order, or decree shall not be reviewable by any other court,

4

FOR PUBLICATI()N IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

for lack of jurisdiction,

On February l2, 2008, this court dismissed all appeals

except for the interlocutory appeal of

the Order Granting Admiral's MPSJ.

Nuuanu valley Ass'n v. Citv & Countv of Honolulu,

194 P.3d 53l,

96,

Admiral'S

II.

On appeal, the grant or denial of summary judgment is
reviewed de novo. See State ex rel. Anzai v. City and
Counfy of Honolulu, 99 Hawai‘i 508, 5l4, 57 P.3d 433, 439
(2002); Bitney v. Honolulu Police Dep't, 96 Hawafi 243,
250, 30 P.3d 257, 264 (200l).

[S]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the affidavits,
any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to
judgment as a matter of law. A fact is material if
proof of that fact would have the effect of
establishing or refuting one of the essential elements
of a cause of action or defense asserted by the
parties. The evidence must be viewed in the light
most favorable to the non-moving party. In other
words, we must view all of the evidence and inferences
drawn therefrom in the light most favorable to the
party opposing the motion.

if

Kahale v. City and County of Honolulu, 104 Hawai‘i 34l,
90 P.3d 233, 236 (2004) (CitatiOn Omitt€d).

344,

119 Hawai‘i 90,

537 (2008).

III.
Plaintiffs contend the circuit court erred in granting

MPSJ. The circuit court held:

IT IS HEREBY ORDERED, ADJUDGED AND DECREED, without
prejudice to any other issues in support of the Motion, that
because there is no genuine issue of material fact that any
property damage as a result of an occurrence took place at
Kalia Tower Project during the Admiral Policy period, which
is required for coverage under Admiral's Policy, Admiral's
[MPSJ] iS GRANTED.

Plaintiffs argue that the circuit court "erroneously concluded

that there was no evidence of property damage caused by an

occurrence during [Admiral's]

Policy Period and dismissed the

indemnity claim."

As a preliminary matter, we note that Admiral's CGL

policy obligates Admiral to pay "those sums that the insured

[Group] becomes legally obligated to pay as damages because of

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

'bodily injury' or 'property damage' to which this insurance
applies." The policy further indicates:

b. This insurance applies to "bodily injury" and
"property damage" only if:

(l) The "bodily injury" or "property damage" is
caused by an occurrence" that takes place in the
"coverage territory"; and

(2) The "bodily injury" or "property damage" occurs
during the policy period.

The policy defines "property damage" as:

a. Physica1 injury to tangible property, including all
resulting loss of use of that property. All such loss
of use shall be deemed to occur at the time of the
physical injury that caused it; or

b. Loss of use of tangible property that is not 4
physically injured. All such loss of use shall be
deemed to occur at the time of the "occurrence" that
caused it.

The mold damage and resulting loss of use of the Tower qualifies
as "property damage" under the policy. The issue is whether this
"property damage" was caused by an "occurrence" during the policy
period. The policy defines "occurrence" as "an accident,
including continuous or repeated exposure to substantially the
same general harmful conditions."
In their complaint, HHC and HHv identified the primary

causes/contributing factors of the mold damage and closure of the

TOW€I` 2

35. On July 24, 2002, following a preliminary
evaluation of conditions in the building, [HHC and HHv]
closed the guest rooms on floors 5 through 25 of the Kalia
Tower to the public. Since the discovery of the mold, [HHC
and HHv] have undertaken extensive efforts to ascertain and
remediate the causes of the excessive mold growth and the
resulting damage to the building and its contents.

36. In the course of its investigation and
evaluation of the Kalia Tower, [HHC and HHv] discovered
numerous material defects in the design and construction of
the Kalia Tower building. Certain of these design and
construction defects were substantial factors causing and/or
contributing to the mold growth in the Kalia Tower and to
the closure of the guest rooms. Others, while not
contributing to the mold, materially affect, among other
things, the value, operation, and integrity of the Kalia
Tower and must be, and are being, corrected.

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

The issue before us is whether alleged faulty
construction work, giving rise to contractual claims, constitutes
an "occurrence" under a CGL policy.

In WDC venture v. Hartford Accident & Indemnitv Co.,
938 F. supp. 671, 677 (D. Hewei‘i 1996), the united states
District Court for the District of Hawafi considered an
insurer's argument "that it is entitled to summary judgment
because it is not liable under the [CGL] Policy for contract-
based claims." The district court noted that "[a]s an initial
matter, . . . there are no cases in Hawaii that are directly on
point regarding the issue of insurance recovery for contract-
based claims." ;Q4 at 677-78. The district court accordingly
looked to California and Pennsylvania precedent, which
collectively held that contractual claims were not covered under
similar insurance policies. ld; at 677-79. Based on this
authority, the district court concluded that "[s]ince WDC
[venture] seeks recovery here for tort and contract claims that
arise from the contractual relationship, the court finds that the
underlying lawsuits are outside the scope of policy coverage in
this case." ld4 at 679 (emphasis in original).

The district court also reasoned that permitting

contractual claims under a CGL would violate public policy:

To allow indemnification for contract-based claims in this
case would not beta reasonable manifestation of the Policy
language; it simply would not make sense for Westchester to
indemnify WDC [venture] for an intentional breach of
contract claim, as doing so would enable WDC to disregard
the contract at will. . . . [T]he court rejects WDC
[venture's] contract-based claims, because to allow coverage
for willful and wanton breach of contract claims would
render the contract meaningless. A breach of contract is an
uninsurable activity, as to hold otherwise would invite such
misbehavior;

l_d_-

In Burlinqton Insurance Co. v. Oceanic Design &
Construction Inc., 383 F.3d 940, 943 (9th Cir. 2004),
dissatisfied homeowners filed a counterclaim against Oceanic, a

builder insured under a GLC policy, based on "allegations

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

that Oceanic improperly designed and/or constructed the
foundation of the residence causing earth movement and resulting
in physical and structural damage to both the residence and the
retaining walls on the property." lQ; Oceanic tendered defense
of the counterclaim to its insurer, Burlington. ;Q¢ Burlington
agreed to defend, but then filed suit, seeking a declaration that
the CGL policy did not provide coverage against the homeowners'
counterclaim. ;g4 Burlington moved for summary judgment,
arguing that none of the homeowners' allegations in the
counterclaim were covered under Oceanic's CGL policy. ;d; at
943-44. The district court agreed and granted Burlington's
motion. ;d4 at 944.

On appeal, Oceanic argued that "allegations of
negligence, even alongside allegations of a breach of contract,
are sufficient to raise a duty to defend." lQ¢ at 946. The
United States Court of Appeals for the Ninth Circuit (Ninth
Circuit) phrased the issue as whether under HawaFi law "a claim
for a negligent breach of contract can constitute an occurrence
under a CGL policy."5 ;Q; at 946. In addressing the issue, the
Ninth Circuit surveyed existing HawaFi law and noted several
principles:

The Hawaii Supreme Court has held, however, that where an
underlying complaint alleges an intentional breach of
contract, there is no occurrence that triggers an insurer's
duty to defend under a standard CGL policy.

[The Hawaii Supreme Court has] stated: "we now
hold that Hawaii law will not allow tort recovery in the
absence of conduct that (l) violates a duty that is
independently recognized by principles of tort law and (2)

transcends the breach of contract." [FYancis v. Lee
Enters., Inc., 89 HawaiH_234, 244, 971 P.2d 707, 717
(l999)].

5 The Ninth Circuit noted that the HawaFi Supreme Court has not
addressed this issue, Oceanic, 383 F.3d. at 946, and so, at the outset, the
Ninth Circuit stated that "[t]o the extent this case raises issues of first
impression, our court, sitting in diversity, must use its best judgment to
predict how the Hawaii Supreme Court would decide the issue." ;Q; at 944
(internal quotation marks, citation, and brackets in original omitted).

8

s

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

The Hawaii Supreme Court has also cautioned of the
need to examine carefully a complaint to "ensure that
plaintiffs could not, through artful pleading, bootstrap the
availability of insurance coverage under an insured
defendant‘s policy by purporting to state a claim for
negligence based on facts that, in reality, reflected
manifestly intentional, rather than negligent conduct."
Dairy Road Partners [v. Island Ins. Co., 92 HawaiU 398,

4l7], 992 P.2d [93,] 112 [(2000)]; see also Bayudan v.
Tradewind Ins. Co., 87 Hawafi 379, [387,] 957 P.2d 1061,
1069 (1998) .

;d; at 946-48. Applying these principles, the Ninth Circuit
concluded that the homeowners' allegations of negligence "cannot
be read to constitute an occurrence under Hawaii law." lQ4 at
948. The court reasoned that because the allegations were
ancillary to the breach of contract claim, they could not "state

a separate independent cause of action for negligence." Id.

Though certain allegations in the homeowners'
counterclaim are couched in terms of negligence, it is
undisputed that Oceanic had entered into a contract to
construct a home for the homeowners. The counterclaim then
alleges that Oceanic breached its contractual duty by
constructing a residence “substantially inferior to the
standard of care and quality which had been agreed " Other
than a breach of that contractual duty, the facts in this
case do not reflect a breach of an independent duty that
would otherwise support a negligence claim. In Hawaii, an
occurrence "cannot be the expected or reasonably foreseeable
result of the insured's own intentional acts or omissions."
Hawaiian Holiday Macadamia Nut [Co. v. Indus. Indem. Co., 76

Hawai‘i l66, 170,] 872 P.2d [230,] 234 [(l994)] (Citing AIG
Hawaii Ins. Co. [v. Estate of Caraang, 74 HawaFi 620, 635-
36,] 851 P.2d [321,] 329 [(1993)]). If Oceanic breached its

contractual duty by constructing a sub-standard home, then
facing a lawsuit for that breach is a reasonably foreseeable
result.

;d; The Ninth Circuit observed that "[a]llowing recovery for
disputes between parties in a contractual relationship over the
quality of work performed would convert this CGL police into a
professional liability policy or a performance bond." lQ; at
949.
The Ninth Circuit noted that its holding was consistent

with WDC venture and its progeny. Oceanic, 383 F.3d at 949
("[O]ur holding is consistent with the line of cases from the

District of Hawaii that hold that contract and contract-based

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

tort claims are not within the scope of CGL policies under Hawaii
law."). 3 3
The Ninth Circuit addressed Oceanic's argument "that

WDC venture no longer accurately represents Hawaii law because
the California case upon which WDC venture relied, Stanford
Ranch, Inc. v. Marvland Cas. Co., 883 F. Supp. 493 (E.D. Cal.
1995), has been implicitly overruled by vandenberg v. Superior
QQgL;, 21 Cal. 4th 8l5, 88 Cal. Rptr. 2d 366, 982 P.2d 229
(1999)." Oceanic, 383 F.3d at 949. The Ninth Circuit explained
that vandenberg rejected the tort/contract distinction for
purposes of CGL insurance coverage and held that insurers
"'cannot avoid coverage for damages awarded against [the insured]
solely on the grounds the damages were assessed on a contractual
theory.' [vandenberg, 982 P.2d] at 246." Oceania, 383 F.3d at
950. The Ninth Circuit then explained:

Unlike California however, Hawaii has not rejected the
distinction between contract and tort~based claims, and
Oceanic fails to cite authority that would suggest
otherwise. To the contrary, the Hawaii Supreme Court has
stated that allowing tort recovery based on a breach of

contract "unnecessarily blurs the distinction between -- and
undermines the discrete theories of recovery relevant to --
tort and contract law." Francis, [89 Hawai‘i at 235,] 971

P.2d at 708. We therefore conclude that changes in
California law do not affect our application of Hawaii law.

lQL at 951.

In Burlinqton Insurance Co. v. United Coatings
Manufacturinq ce., 518 F. supp. 2d 1241, 1249 (D. Hewei‘i 2Q07),
the district court read WDC venture, its progeny, and Oceanic for
the proposition that "under Hawaii law 'contract and contract-

based tort claims are not within the scope of CGL policies.'"

Courts have employed different terms to articulate
this "contract-based" standard, including "arising only from
the contract," "stemming directly from the contract,"
"derivative of the contractual relationship," "based on
breach of contract," "claims dependent upon the existence of
an underlying contract," "contract-like claims," "other than
a breach of that contractual duty," and "but for the
contractual relationship." See generally Burlington Ins.
Co., 383 F.3d at 948, 953, 955; [State Farm Fire & Cas. Co.
V.] Lau, 2007 WL 1288153, at *4 [(D. Haw. Apr. 30, 2007)];
State Farm Fire & Cas. Co. v. Scott, 2007 U.S. Dist. Lexis
8255, at *24 (D. Haw. Jan. 24, 2007); CIM Ins. Corp. v.

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FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

Midpac Auto Ctr., 108 F. Supp. 2d lO92, 1100 (D. Haw. 2000);
ClM Ins. Corp. v. Masamitsu, 74 F. Supp. 2d 975, 987 (D.
Haw. l999); WDC Venture, 938 F. Supp. at 677, 679. whatever
the phrasing, the relevant query is whether the genesis or
origin of the underlying claims, including those sounding in
tort, is premised on a contractual relationship or is based
on an independent tort claim under state law.

United Coatings, 518 F. Supp. 2d at 1250-51 (footnote omitted).

Plaintiffs highlight precedent from outside HawaiH
holding that construction defect claims are covered claims under
CGL policies.

There is a split of authority on the issue. Gen. Sec.
Indem. Co. v. Mountain States Mut. Cas. Co., 205 P.3d 529, 534
(Colo. Ct. App. 2009) ("There is a split among other
jurisdictions whether a defective workmanship claim, standing
alone, is an 'occurrence' under CGL policies."). The line of

federal cases applying Hawafi law follow the majority positionQ

A majority of those jurisdictions has held that claims
of poor workmanship, standing alone, are not occurrences
that trigger coverage under CGL policies similar to those at
issue here. See J.Z.G. Resources, Inc. v. King, 987 F.2d 98
(2nd Cir. 1993); State Farm Fire & Cas. Co. v. Tillerson,
334 Ill. App. 3d 404, 268 Ill. DeC. 63, 777 N.E.2d 986
(2002); Pursell Constr., [Inc. v. Hawkeye-Sec. Ins. Co.],
596 N.w.2d 67 [(Iowa 1999)]; Auto-Owners [Ins. Co. v. Home
Pride Cos.], 684 N.w.2d [571,] 576 [Neb. 2004)]; Kvaerner
Metals Div. of Kvaerner U.S. Inc. v. Commercial Union Ins.
Co., 589 Pa. 3l7, 908 A.2d 888 (2006); L-J, Inc. V.
Bitum1neus F1re 6 Mar1ne ins , 366 s.c. 117, 621 s.s.2d 33
(2005); Christopher Burke, Construction Defects and the
Insuring Agreement in the CGL POlic --There is no Coverage
for a Contractor's Failure to Do What it Promised, Prac. L.
Inst.: Litig. No. 8412, Insurance Coverage 2006: Claim
Trends and Litigation 73, 82 (May 2006) (Burke) (collecting
cases) ("Courts from no less than 25 states have adopted the
position that there is no coverage [under CGL policies] for
construction defect claims."). '

Gen. Sec., 205 P.3d at 535.

The cases Plaintiffs cite follow the minority position:

In contrast, a minority of jurisdictions has held that
the damage resulting from faulty workmanship is an accident,
and thus, a covered occurrence, so long as the insured did
not intend the resulting damage. See Great Am. Ins. Co. v.
Woodside Homes Corp,, 448 F. Supp. 2d 1275 (D. Utah 2006);
United States Fire Ins. Co. v. J.S.U.B. Inc., 979 So. 2d 871
(Fla. 2007); Lee Builders, Inc. v. Farm Bureau Mut. Ins.
Co., 281 Kan. 844, 137 P.3d 486 (2006); Travelers Indem. Co.
[of Am.] v. Moore & Assocs., Inc., 216 S.w.3d 302 (Tenn.
2007); Lamar Homes, Inc. v. Mid~Continent Cas. Co., 242

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S.w.3d 1 (Tex. 2007); Am. Family Mut. Ins. Co. v. Am. Girl,
Inc., 268 WiS. 2d 16, 673 N.W.Zd 65, 83 (2004).

Li-

we hold that under Hawafi law, construction defect
claims do not constitute an "occurrence" under a CGL policy.
Accordingly, breach of contract claims based on allegations of
shoddy performance are not covered under CGL policies.
Additionally, tort-based claims, derivative of these breach of
contract claims, are also not covered under CGL policies.

Iv. `

The "Order Granting Defendant Admiral Insurance
Company's Motion for Partial Summary Judgment Re: No Duty to
1ndemnify, Filed on June 25, 2008" filed on September 23, 2008 in

the Circuit Court of the First Circuit is affirmed.

On the briefs:

Melvyn M. Miyagi
(watanabe & 1ng, LLP)

wesley H. Sakai, Jr. ` é2p ”"/
(Bendet, Fidell, Sakai & Lee) .1

for Plaintiffs/Counterclaim
Defendants-Appellants/
Cross-Appellees.

Joseph F. Kotowski, 111

Allen R. wolff (Olshan Grundman é3j'
Frome Rosenzweig & wolosky LLP)
for Defendant/Counterclaimant/

Cross-Claimant-Appellee/ '

Cross~Appellant Admiral
Insurance Company.

12