DESIGNATED PREMISES OR PROJECT ENDORSEMENT IS NOT SPECIFIC ENOUGH

Commercial General Liability	Arising out of
Designated Premises

The Kaholo Dam in Hawaii collapsed. Three million gallons of water was released killing seven people and causing significant property damage. James Pflueger (Pflueger) owned the dam at the time of the loss. He sued C. Brewer and Company, Ltd. (Brewer), the prior owner of the dam, for having sold him a dam with questionable structural integrity.

Brewer filed a complaint asking for a ruling regarding the coverage available from 17 different insurance companies. The action in this case applies to coverage provided by James River Insurance Company (James River) because it was the only one of the 17 insurance policies that was in effect at the time of the dam breach.

James River denied coverage because of a Limitation of Coverage to Designated Premises or Projects endorsement. The dam was not listed as a designated premises or project, so James River argued that no coverage was owed. The trail court awarded summary judgement for James River. Brewer appealed.

Brewer argued that the following wording in the endorsement was ambiguous:

This insurance applies only to "bodily injury", "property damage", "personal and advertising injury" and medical expenses arising out of the ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises;

It argued that injury and damage due to negligent business decisions made in the designated premises (the corporate headquarters) should be covered.

The appellate court found Brewer’s alternative reading of the endorsement to be reasonable which resulted in the endorsement being ruled ambiguous. However, the appellate court ruled that it was necessary to determine the parties’ intent in using the endorsement. The trial court’s decision was vacated. James River appealed.

The Supreme Court of Hawaii carefully reviewed the language of the endorsement to see if the limitation was clear and unequivocal. It concluded that the wording was not and therefore affirmed the ruling in Brewers favor of the appellate court. It vacated the portion of the appellate court regarding the need to determine the intent of the parties.

The case was remanded back to the trial court for further action.

C. Brewer and Company LTD., Respondent/Plaintiff-Appellant v. Marine Indemnity Insurance Company of America; Fireman’s Fund Insurance Company of Hawaii; and James River Insurance Company, Petitioners/Defendants – Appellees. No. SCWC-28958. March 27, 2015. Supreme Court of Hawaii