South Carolina District Court Finds No Duty to Defend Under Hawaii Law

    Applying Hawaii law, the district court found the insurer had no duty to defend a suit for personal injury caused by environmental harm. Koppers Performance Chems., Inc. v. Travelers Indem. Co., 2022 U.S. Dist. LEXIS 71642 (D. S.C. April 18, 2022).

    From 1979 to 1982, Argonaut-Midwest Insurance Company (Argo) issued policies to Osmose Wood Preserving Co. of America, Inc. and Griffin Forest Industries, Inc. DBA Hawaii Wood Preserving Co, and DBA Osmose Pacific, Inc. a subsidiary. The 1979 Argo policy was issued pursuant to an application submitted by Triad Insurance Agency in Honolulu.

    On November 24, 2014, Philip Riley sued Koppers Performance Chemicals, Inc. aka Osmose Wood Preserving Co. of America. Riley alleged that he was a citizen of and resided in South Carolina and that Koppers manufactured the wood treatment chemicals (namely cremated copper arsenate (CCA)) that caused him to developer cancer due to exposure at his job. Nearly two years later, Koopers tendered the complaint to Argo. Koopers also provided one page from Riley’s deposition where Riley testified that the “timeframe that I’m talking about” was “from ’78 to ’92, from the time I was born until I stopped working with CCA.”

    Argo denied coverage because Koppers was not a named insured. Koppers eventually settled claims with Riley for $150,000. Koopers sued Argo to recover costs associated with defending and settling the underlying action. 

    The court first found that the Argo policies were governed by Hawaii law. The policies were obtained through a Hawaii broker and insured property exclusively within Hawaii. Riley was a citizen of and allegedly injured by Koppers’ product in South Carolina. Therefore, there was no nexus between the Argo policies and South Carolina. 

    The court next held that the complaint did not trigger coverage under the Argo policies. The original complaint did not name any of the DBA entities or describe Koppers’ Hawaii operations. The complaint did not allege bodily injury during the applicable policy periods from around 1979 to around 1982. Therefore, under Hawaii’s complaint allegation rule, the duty to defend was not triggered by the original complaint. The duty to defend was limited to situations where the underlying pleadings alleged a claim for relief which fell within the terms for coverage under the policy. The complaint here contained no such allegations. The fact that Koppers submitted to Argo an excerpt from Riley’s deposition along with the original complaint did not change this conclusion. 

    [Here, the court seems to ignore the extrinsic evidence rule utilized by Hawaii courts: if extrinsic evidence outside the pleadings favors the insured, if must be considered for purposes of determining a duty to defend. Dairy Roads Partners v. Island Ins. Co., Ltd., 92 Haw. 398, 421-22 (2000)].

    Accordingly, Argo had no duty to defend or indemnify Koppers regarding the underlying action.