Opinion ID: 871623
Heading Depth: 3
Heading Rank: 1

Heading: Ambiguities in the insurance contract must be resolved in favor of the insured.

Text: An insurer's duty to defend stems from the policy contract and, thus, the language of the policy involved determines the scope of that duty. Sentinel Ins. Co., Ltd. v. First Ins. Co. of Haw., Ltd., 76 Hawai`i 277, 287, 875 P.2d 894, 904 (1994). When interpreting insurance contracts, this court has acknowledged that insurers have the same rights as individuals to limit their liability and to impose whatever conditions they please on their obligation, provided they are not in contravention of statutory inhibitions or public policy. Dairy Road, 92 Hawai`i at 411, 992 P.2d at 106 (quoting First Ins. Co. of Haw., Inc. v. State, 66 Haw. 413, 423, 665 P.2d 648, 655 (1983)) (brackets omitted). Furthermore, TICOR correctly points out that [a] court must respect the plain terms of the policy and not create ambiguity where none exists. Allstate, 118 Hawai`i at 182, 186 P.3d at 617 (internal quotation marks omitted) (quoting Smith v. New England Mut. Life Ins. Co., 72 Haw. 531, 537, 827 P.2d 635, 638 (1992)). However, because insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and any ambiguities must be resolved against the insurer. Dairy Road, 92 Hawai`i at 411-12, 992 P.2d at 106-07 (brackets and citations omitted). Courts are to construe insurance policies in accord with the reasonable expectations of a layperson. Id. at 412, 992 P.2d at 107 (citations omitted). Ultimately, [a]ll doubts as to whether a duty to defend exists are resolved against the insurer and in favor of the insured[.] Id. (quoting Sentinel, 76 Hawai`i at 287, 875 P.2d at 904). In the instant case, the parties dispute whether the State's escheat reservation contained in its answer and answer to amended petition qualifies as an escheat claim that triggered coverage under the Harts' Policy. The Harts maintain that the State's answer asserted interest in and claims against the Harts' property. On the other hand, TICOR argues, and the ICA agreed, that the State was not making an escheat claim in its Answer, but was merely indicating that it was not waiving, by its response, any claims based on escheat. Hart, 2011 WL 2938210, at . Accordingly, TICOR contends that the term claim is unambiguous. We agree with the Harts. In Allstate, this court determined that because the term any person was not defined in the applicable automobile insurance policy, and given the context of the term's usage, any person was ambiguous and should, therefore, be construed in favor of the insured. 118 Hawai`i at 182, 186 P.3d at 617. Standing alone, an ambiguous term should be interpreted according to its plain, ordinary, and accepted sense in common speech[.] Id. (brackets and citation omitted). However, this court need not do so if it appears from the policy that a different meaning is intended. [15] Id. (internal quotation marks and citation omitted). Some terms have clear meaning when standing alone, but that meaning can become ambiguous through the manner in which those terms are used throughout the policy. [16] Id. at 183, 186 P.3d at 618 (internal brackets, ellipses, emphasis and citation omitted). As persuasive authority, in St. Paul Fire & Marine Insurance Co. v. Hawaiian Insurance & Guaranty Co., 2 Haw.App. 595, 637 P.2d 1146 (1981), the ICA adhered to the commonly accepted legal meaning of the term claim to determine that when an insurance policy contained no definition of claim, three separate acts of negligence [17] resulted in three claims for purposes of the policy's liability limitation clause. Though the ICA decided St. Paul Fire before this court's landmark decisions in Sentinel and Dairy Road, the ICA correctly stated therein that [i]nsurance contracts are contracts of adhesion ... [;] they are to be liberally construed in favor of the insured and against the insurer. Id. at 596, 637 P.2d at 1147 (citations omitted); see Dairy Road, 92 Hawai`i at 411-12, 992 P.2d at 106-07 ([I]nsurance policies are contracts of adhesion ... [;] they must be construed liberally in favor of the insured and [any] ambiguities [must be] resolved against the insurer.) (citations omitted, some brackets added). Unlike in Allstate, claim in the instant Policy is not used in different ways within the contract as to create ambiguity. Instead, as in St. Paul Fire, ambiguity arises here simply because claim is not defined in the Policy. Following the general construction rules explained in Dairy Road and Allstate, claim should be interpreted according to its plain, ordinary, and accepted sense in common speech consistent with the reasonable expectations of a layperson. See Dairy Road, 92 Hawai`i at 412, 992 P.2d at 107 (this court construes insurance policies in accord with the reasonable expectations of a layperson); see also Allstate, 118 Hawai`i at 182, 186 P.3d at 617 (this court construes policy terms according to their plain, ordinary, and accepted sense in common speech). Any ambiguities must be liberally construed in favor of the insured. Dairy Road, 92 Hawai`i at 411-412, 992 P.2d at 106-07. A claim includes any interest or remedy recognized at law; the means by which a person can obtain a privilege, possession, or enjoyment or a right or thing[.] [18] Black's Law Dictionary 282 (9th ed. 2009). TICOR's argument that claim is unambiguous and that the State did not assert a claim within the meaning of the policy is unpersuasive. In this case, the State twice asserted that it had interest in or affecting [the property], which are as follows: ... 6. The State reserves any interests in the property that may have escheated to the State. Additionally, the State twice requested affirmative relief: Wherefore, [the] State prays that the Court rules that: ... 6. The State has reserved any interests in the property that may have escheated to the State[.] We agree with the Harts that [t]hrough the reservation, the State alleged it had existing rights and interest in the [p]roperty that may have escheated and that those rights and interest would be noted against the Harts' Land Court-registered title.... The State's escheat reservation was an independent and affirmative claim to an interest in the Harts' [p]roperty, just like every other reserv[ation] made in the State's pleadings. For example, the State reserved the rights of native tenants in the property, and an easement for the free flowage of waters through, over, under, and across the property. The State prevailed on some of those claimed interests and lost on others. Those reservations plainly sought to assert claims. A layperson would have construed the State's escheat language as the State asserting a claim against the Harts' title. Moreover, interpretation of the State's escheat claim in accord with the ordinary, plain and common definition of claim indicates coverage under the Policy. Ambiguity surrounding the definition of claim should have been construed for the Harts and in favor of coverage. Ultimately, because claim is not defined in the Policy, and because the State's allegations twice sought to establish the State's present escheat interest in the Harts' insured property and twice requested affirmative relief regarding its present escheat interest, the State's reservation fell within the broad, common definition of claim as covered under the Policy. The ICA erred in construing this ambiguity in favor of TICOR and by concluding that the State failed to assert an escheat claim.