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AIG Hawaii Insurance Co. v. Smith2/28/1995
OPINION OF THE COURT BY MOON, C.J.
Defendant-appellant Eric Castillo and defendants-counterclaim plaintiffs-appellants Christopher T. F. K. Smith, Sr. individually and as Special Administrator of the Estate of Christopher T. F. K. Smith, Jr., Mary A. L. Smith, and Cyd L. Smith, individually and as Guardian Ad Litem for Keikilaniilipanio K. Smith, Iokua K. Smith, and Tiare A. Smith, minors (the Smith appellants), appeal the trial court's order granting summary judgment in favor of plaintiff-appellee AIG Hawaii Insurance Company, Inc. (MG). In this action, AIG sought declaratory relief regarding its rights and duties under an insurance policy issued to Castillo as well as under separate but identical insurance policies issued to Castillo's father and brother. AIG moved for summary judgment asserting that, under the circumstances of the accident in question, it had no obligation to provide liability coverage to Castillo in connection with the wrongful death action filed by the Smith appellants on behalf of Christopher T. F. K. Smith, Jr. (Smith), who was killed in the accident. The trial court agreed and granted summary judgment in favor of AIG.
On appeal, Castillo and the Smith appellants (collectively, appellants) assert that: (1) a genuine issue of material fact exists concerning whether AIG is estopped from denying coverage; and (2) appellants are entitled to coverage under Castillo's father's and brother's AIG policies based upon Castillo's standing as a family member of the same household. Additionally, the Smith appellants contend that AIG is obligated to provide coverage because it failed to timely answer two requests for admissions.
Based on our review of the record, we conclude that, at the time AIG undertook Castillo's defense, it knew or should have known that grounds for noncoverage existed. However, without securing a reservation of rights, AIG assumed control over Castillo's defense, to his detriment. We therefore hold that, because of the prejudice to Castillo resulting from AIG's unconditional assumption of his defense, AIG is estopped from denying coverage to Castillo under his own policy. We also hold that Castillo qualifies as a "covered person" under his father's and brother's separate policies and is not subject to any applicable exclusions. Consequently, we need not address the Smith appellants' contention regarding AIG's obligation to provide coverage for failure to timely answer the requests for admissions.
Accordingly, we reverse the trial court's order granting summary judgment in favor of AIG and remand this case for entry of summary judgment in favor of appellants.
I. FACTS
On the morning of June 6, 1988, counterclaim defendant-appellee Frederick Lawrence, along with several Waialua High School students, attended a barbecue at Kaiaka Beach Park. Although the record is unclear, one or more students, not including Castillo, had arranged for someone to purchase them one or two cases of beer. The beer was placed into a cooler in the trunk of Castillo's automobile and transported to the beach park at approximately 11:00 a.m. At the barbecue, Lawrence consumed approximately six beers during a two- to three-hour period.
At approximately 2:00 p.m., Castillo left the barbecue and drove to the Matsumoto Shave Ice store. Some time later, Lawrence, Roger Menor, and Orlando Bitanga left the beach park and went to Menor's residence. Lawrence, an unlicensed minor and allegedly intoxicated, then took Bitanga's vehicle without permission. While being pursued by the police, Lawrence struck and killed Smith, a pedestrian. Neither Castillo nor his vehicle were in the proximity of the accident.
On August
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