Unpublished Disposition, 889 F.2d 1096 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 889 F.2d 1096 (9th Cir. 1989)

TRANSAMERICA INSURANCE GROUP, Plaintiff-Appellee,v.HAWAIIAN INSURANCE AND GUARANTY COMPANY, LTD., a Hawaiicorporation, et al., Defendants-AppellantsUNITED SERVICES AUTOMOBILE ASSOCIATION, a Texas corporation,Plaintiff-Appelleev.HAWAIIAN INSURANCE AND GUARANTY COMPANY, LTD., a Hawaiiancorporation; the Travelers Insurance Companies, aConnecticut corporation, et al.,Defendants-AppellantsandEnercon, Inc. Defendant Third Party-Appellant

No. 88-2941.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 6, 1989.Decided Nov. 21, 1989.



Hawaiian Insurance & Guaranty Co. (HIG) appeals from summary judgments establishing HIG's liability to defend and cover claims against four teenaged employees of its named insured, Enercon, Inc., who were involved in a fatal accident in Hawaii.

The facts are not in dispute. The employees drove one of their own cars to and from Enercon's remote work site under a car pool arrangement established by Enercon. The driver was paid $20 per round trip, and all employees were paid wages during travel. The accident occurred when they were on the way home, after work and a swim. The car hit and killed a nine-year old boy. The underlying tort suit was settled by insurance companies representing three of the individual employees and their parents. United Services Automobile Association (USAA) represented the Garritys who owned the car involved in the accident, and whose son was driving. First Insurance Co. of Hawaii Ltd. represented the Bertrands. Transamerica Insurance Group represented the Mows. USAA brought a declaratory judgment in federal court against HIG, the Travelers Insurance Co. (which represented Windfarm, a company that had engaged Enercon to do the work from which the accident arose), and the families of the passengers in the car, to determine their respective obligations to participate pro rata in the costs of settlement. The district court decided the case on seven motions for summary judgment. HIG attacks six of these rulings.


HIG raises three major issues. It contends that the district court erred in ruling: (1) that USAA's policy excluded coverage for all but $25,000 mandated by Hawaii law; (2) that HIG's policy insuring Enercon obligated it to defend the employees and pay a share of the settlement; and (3) that USAA, the Bertrands, and Transamerica were entitled to attorneys' fees from HIG for this litigation.

We affirm the judgment of the district court in all respects.


USAA's policy excluded coverage for a vehicle "while it is being used to carry persons or property for a fee." The district court determined that the exclusion applied to this accident, but that Hawaii's no-fault law required minimum coverage of $25,000 despite the exclusion. HIG contends that the court erred because the policy exclusion states that it "does not apply to a share-the-expense car pool."

USAA responds that HIG's argument is a new one, not properly raised in district court. It does not matter, however, because it is clear that the arrangement involved in this case was not a "share-the-expense" car pool in any reasonable meaning of that term. Expenses of travel were not shared by the car's occupants; the driver was paid a flat fee of $20 by Enercon for every round trip. See Jensen v. Canadian Indem. Co., 98 F.2d 469, 471 (9th Cir. 1938), cert. denied, 307 U.S. 622 (1939). This was not an arrangement between friends, such as the $10 per week rental in Christensen v. State Farm Mut. Auto Ins. Co., 52 Haw. 80, 470 P.2d 521 (1970); it was a business arrangement serving the purposes of Enercon in transporting employees to a remote site.

HIG next argues that, even if USAA's exclusion applies, the district court incorrectly interpreted the minimum requirement of Hawaii law when it set USAA's liability at $25,000. HIG contends that USAA should also be liable for up to $25,000 to each member of the decedent's family who sustained emotional distress as a result of the accident.

Hawaii Revised Statutes Sec. 294-10 requires any no-fault policy to provide coverage for the owner or operator of a vehicle for "sums which the owner or operator may legally be obligated to pay for injury, death, or damage to property" arising from use of the vehicle. (Emphasis added.) At the time of the accident, the required minimum amount of such coverage was "not less than $25,000 for all damages arising out of accidental harm sustained by any one person." Id.1 

HIG argues that each member of the decedent's family who suffered emotional distress qualifies independently as a person "sustaining accidental harm," and that USAA is liable up to $25,000 for each of them. See Rodrigues v. State, 52 Haw. 156, 283, 472 P.2d 509 (1970) (emotional distress is independent injury, derived from independent duty of care); Leong v. Takasaki, 55 Haw. 398, 520 P.2d 758 (1974) (same). USAA argues that, at least for purposes of section 294-10, the emotional distress claims are derivative and only one limit should apply; only one person suffered "accidental harm." See Yamamoto v. Premier Ins. Co., 4 Haw.App. 429, 668 P.2d 42 (1983) (minimum coverage policy places one $25,000 limit on claims of accident victim and spouse's claim for loss of consortium), overruled on other grounds, Doi v. Hawaiian Ins. & Guar. Co., 6 Haw.App. 456, 727 P.2d 884 (1986).

We do not find it necessary to resolve this question, because we find another argument of USAA dispositive. USAA is required by section 294-10 to insure sums that its insured is legally obligated to pay. Section 294-6, Haw.Rev.Stat., abolishes tort liability of owners and operators of motor vehicles except for claims meeting certain threshold requirements: (1) death, loss of a body part, or disfigurement of the claimant; (2) injury to claimant in which medical expenses exceed certain medical-rehabilitative limits; and (3) injury to claimant as a result of which certain no-fault benefits specified in section 294-2(10) are exhausted (for medical, therapeutical, and similar expenses, and loss of earnings). USAA contends that HIG has made no attempt to show that the emotional distress claims of decedent's family meet these threshold requirements, and we agree. There has consequently been no showing that USAA's insured was "legally obligated to pay" these claims if they were independent of the death claim, as HIG contends. Section 294-10 consequently does not render USAA liable beyond the single $25,000 limit then applicable.


HIG's policy with Enercon defined the "insured" to include "any other person while using an owned automobile or a hired automobile with the permission of the named insured" if the user was an employee of the named insured. Applying this provision, the district court held that HIG was obligated to defend and cover Enercon's teenage employees for this accident.

HIG first contends that the Garritys' car was not a "hired" automobile, for many of the same reasons that it urged in relation to USAA's liability. It contends that a "shared-expense" car pool is not a hired car. We reject this contention for the same reasons that we did in relation to USAA's policy. Enercon paid the driver of the car $20 per round trip to transport the employees to Enercon's remote work site. In such a case, Enercon is "fairly viewed as having augmented [its] automobile fleet to meet [its] business needs," Transport Indem. Co v. Liberty Mut. Ins. Co., 620 F.2d 1368, 1372 (9th Cir. 1980), and the policy's purposes are served by treating the vehicle as hired.

HIG next contends that the automobile in issue qualifies as a "non-owned" rather than a "hired" automobile, under the policy's definition of "hired automobile":

an automobile not owned by the named insured which is used under contract in behalf of, or loaned to, the named insured, provided such automobile is not owned by or registered in the name of ... (b) an employee or agent of the named insured who is granted an operating allowance of any sort for the use of such automobile.

HIG argues tht Robert Garrity, the car's driver, meets the qualifications above because he was paid $20 per round trip. We need not decide whether that payment constitutes an "operating allowance of any sort," because it is undisputed that Robert Garrity was not the owner of the vehicle (which was owned by his mother), nor was it registered in his name. The clause simply does not apply. See Phillips v. Government Employees Ins. Co., 395 F.2d 166 (6th Cir. 1968) (son of owner who granted permission to another driver does not qualify as "owner"); Haw.Rev.Stat. Sec. 294-2(13) (for purposes of Hawaii no-fault law, "owner" means person holding legal title to vehicle). The district court was accordingly correct in ruling that HIG's policy covered Garrity's vehicle as a "hired auto."


Under Haw.Rev.Stat. Secs. 431-455 parties litigating to enforce insurance coverage or contribution are awarded reasonable attorneys' fees if they prevail. Standard Oil Co. v. Hawaiian Ins. & Guar., 2 Haw.App. 451, 634 P.2d 123 (1981), aff'd, 655 Haw. 521, 654 P.2d 1345 (1982). The district court properly awarded attorneys' fees to the plaintiffs in this action for enforcement, and we affirm. Appellees are also entitled to reasonable attorneys' fees incurred in defending this appeal. Application should be made in accordance with Ninth Cir.R. 39-1.


The judgment of the district court is, in all respects, AFFIRMED.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Cir.R. 36-3


The applicable Hawaiian insurance laws were repealed in 1989 and the new code begins at Hawaii Revised Statutes Sec. 431:10C