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

Heading: The Harts' Land Court Proceeding

Text: On August 2, 2005, the Harts filed a Land Court petition to consolidate their two lots into one parcel. [4] In response to the Harts' proceeding, the State of Hawai`i (State) filed an answer to the Harts' petition for consolidation (Answer) on October 24, 2005. The State's answer asserted present interests in the Harts' property, in relevant part: THIRD DEFENSE: ... [the] State denies any allegations adverse to its interest in or affecting [the Harts' property], which are as follows: 1. The State owns the submerged land up to the upper reaches of the wash of the waves, including the erosion areas. 2. The State owns all mineral and metallic mines of every kind or description on the property, including geothermal rights, and the right to remove the same. 3. The State reserves the rights of native tenants in the property. 4. The State reserves all right, title, interest[] or claim to waters having their source upon or flowing over or under the property. 5. The State reserves an easement for the free flowage of waters through, over, under[] and across the property. 6. The State reserves any interests in the property that may have escheated to the State. 7. The State reserves any other interests in the property that may be revealed during the course of this Petition proceeding. (Emphasis added). The State then requested the following affirmative relief from the Land Court regarding its escheat claim: 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[.] Later, on October 30, 2006, the State again asserted these same claims in its answer to the Harts' amended petition for consolidation (Answer to Amended Petition). Ultimately, through its answer and answer to amended petition, the State twice asserted its present interest in the Harts' property by way of escheat and twice asked the Land Court for affirmative relief. The Harts tendered their defense against all the State's claims to TICOR on November 7, 2005. TICOR refused the Harts' tender on January 4, 2006. TICOR's January 4, 2006 response collectively categorized the State's claims, reservations and defenses as the State's Claims. TICOR explained that because the Harts did not specify which of the State's Claims they were tendering to TICOR, TICOR assumed that the tender was for the defense of the State's water and mineral rights, native tenants' rights, erosion and shoreline setback claims. Based on the Policy's Exclusions for Coverage and Schedule B, TICOR concluded that defense of these specific claims was excluded under the Policy. The Harts replied on January 9, 2006, contending that TICOR cited no policy exclusion for [the escheat] claim, and the [P]olicy insures that the State owns no interest in the insured property by way of escheat. Thus, [TICOR] is obliged to defend against that claim. TICOR disagreed. Significantly, however, in a March 9, 2006 letter to the Harts, TICOR conceded that a claim of escheat is not excluded from coverage, but contended that [w]hile escheat to the state is not a matter which is excluded from coverage, it does not appear that the [S]tate is currently making any claim of escheat. Rather, the State has merely reserved its right to make that claim at some point in the future. Accordingly, in TICOR's view, the State did not assert any claim that fell within the Harts' Policy coverage. Consequently, the Harts proceeded to defend against all of the State's claims in Land Court. The Harts filed a motion for summary judgment to resolve all encumbrances on title claimed by the State (Motion for Summary Judgment Re: Encumbrances) on June 6, 2007. On June 22, 2007, the State filed a memorandum in opposition to the Harts' motion for summary judgment re: encumbrances, stating [t]he State is not pursuing any claim of escheat to the State. The Land Court heard the motion on July 2, 2007. [5] On December 5, 2007, the Land Court granted in part and denied in part the Harts' motion: [the Harts'] Motion is granted as the court has determined that there is no basis for the State's claims for the rights of native tenants, mineral and metallic mines[] and escheat, and is denied as to the State's claims for submerged lands up to the shoreline, underground water and surface streams[] and an easement for the free flowage of water. However, the State is not foreclosed in the future from asserting claims for the rights of native tenants or mineral and metallic mines if they actually manifest in the future. (Emphasis added). On February 1, 2008, the Land Court ordered the consolidation of the Harts' lots. On March 28, 2008, the Harts requested reimbursement from TICOR for the legal fees associated with its defense of the State's claims against their property. The Harts contended that the State asserted an escheat claim covered under the Policy, and though it was a false claim[,] ... defense against the escheat claim was inseparably part of the defense of all claims, and [TICOR] was obligated to see the defense through to conclusion by court ruling. Accordingly, the Harts demanded reimbursement for their attorneys' fees and costs in the amount of $28,982.43 and notified TICOR that if it failed to respond by April 18, 2008, the Harts would file suit. TICOR responded with a letter affirming denial of the Harts' defense claim on May 2, 2008.