Opinion ID: 871623
Heading Depth: 3
Heading Rank: 2

Heading: The insurer's duty to defend arises at the mere potential of coverage under a policy.

Text: The obligation of an insurer to defend an insured is distinct from the duty to provide coverage. Pancakes of Haw., Inc. v. Promare Prop. Corp., 85 Hawai`i 286, 291, 944 P.2d 83, 88 (1997). Indeed, an insurer's duty to defend is broader than the duty to pay claims and arises wherever there is the mere potential for coverage[] under a policy. Dairy Road, 92 Hawai`i at 412, 992 P.2d at 107 (quoting Sentinel, 76 Hawai`i at 287, 875 P.2d at 904) (emphasis in original). This obligation to defend rests primarily on the possibility that coverage exists. This possibility may be remote but if it exists, the insurer owes the insured a defense. Id. (quoting Sentinel, 76 Hawai`i at 287, 875 P.2d at 904) (emphasis in original, brackets omitted). Indeed, an insurer's duty to defend attaches when the language of the pleadings may plausibly be read as asserting a present claim, as is the case here. [19] The duty to defend is not outcome-determined but merely depends on a potential for coverage and is determined at the time suit is brought and not at the conclusion of litigation. Commerce & Indus. Ins. Co. v. Bank of Haw., 73 Haw. 322, 327, 832 P.2d 733, 736 (1992) (internal quotation marks omitted) (quoting First Ins. Co., 66 Haw. at 420, 665 P.2d at 653). Stated differently, to have any effect at all, the duty to defend must be determined when the claim is initially asserted. [20] Pancakes of Haw., 85 Hawai`i at 292, 944 P.2d at 89. Furthermore, an insurer's ultimate non-liability should not free it from its concurrent [and distinct] contractual duty to defend. First Ins. Co., 66 Haw. at 420, 665 P.2d at 653 (internal quotation marks omitted). The insurer must employ a good-faith analysis of all information known to the insured or all information reasonably ascertainable by inquiry and investigation[] to determine whether the possibility of coverage under a policy exists. Standard Oil Co. of Cal. v. Hawaiian Ins. & Guar. Co. Ltd., 65 Haw. 521, 527, 654 P.2d 1345, 1349 (1982). All doubts as to whether a duty to defend exists are resolved against the insurer and in favor of the insured. Sentinel, 76 Hawai`i at 287, 875 P.2d at 904 (quoting Trizec Prop., Inc. v. Biltmore Constr. Co., Inc., 767 F.2d 810, 812 (11th Cir.1985)) (brackets omitted). In summary, the pleadings underlying the Harts' tender reveal that TICOR had a duty to defend the Harts, determined at the time the State asserted the escheat claim because, at that time, the language of the State's answer, answer to amended petition, and affirmative prayers for relief, plausibly asserted a present claim of escheat, and TICOR conceded that a claim of escheat is not excluded from coverage under the Policy. We agree with the Harts that [o]nce the possibility of coverage triggered the duty to defend, TICOR had the duty to defend, regardless of whether the allegations were `groundless, false, or fraudulent' or whether some of the claims `[fell] outside of the policy's coverage.' The fact that the State ultimately clarified that it was not pursuing any claim of escheat to the State[] did not excuse TICOR from its initial duty to defend. See Hart, 2011 WL 2938210, at  n. 2. Considering the specific and unique facts of this case, the ICA erred in concluding that TICOR did not have a duty to defend the Harts. Id. at . Additionally, we disagree with the ICA's conclusion that the State's escheat claim did not trigger TICOR's duty to defend the Harts because the State failed to follow the proper procedure for bringing an escheat claim under HRS § 665-1 (1993). Id. By so concluding, the ICA improperly tied TICOR's duty to defend to the sufficiency or merits of the State's pleading. Put differently, the ICA erroneously made TICOR's duty to defend contingent upon the outcome or ultimate sufficiency of the State's escheat claim.