Hawaii Supreme Court Remands Malpractice Claim Against Agent

    The Hawaii Supreme Court vacated and remanded the decision of the Intermediate Court of Appeals (ICA) regarding a malpractice claim against the insured’s agent. Pflueger, Inc. v. AIU Holdings, Inc., 2023 Haw. LEXIS 44 (Haw. Feb. 22, 2023).  Our prior post on the ICA’s decision is here. 

    In May 2008, Pflueger notified its agent, Noguchi & Associates, Inc., that it had received federal grand jury subpoenas. Noguchi informed Pflueger that the subpoenas did not qualify as a “claim” under two policies issued by National Union. Consequently, Noguchi did not forward a claim or the subpoenas to National Union and did not seek clarification as to whether the grand jury subpoenas were covered under the policies. Pflueger relied upon Noguchi’s representations and took no further action until its attorney submitted a demand letter tendering Pflueger’s defense to National Union nine months later, in February 2009. 

    National Union found the claim untimely. Further, the materials submitted to National Union did not constitute a claim. The policies required the materials submitted to be an indictment, information or similar document to constitute a claim. 

    Pflueger filed suit against National Union and Noguchi. Pflueger alleged Noguichi was negligent and had made negligent misrepresentations. Pflueger eventually settled with National Union. 

    Prior to trial, the court granted Pflueger’s motion for partial summary judgment, finding that the grand jury subpoenas constituted a “claim” as that term was defined in National Union’s policy. The jury then returned a special verdict in favor of Pflueger. Noguchi appealed, and the ICA vacated the judgment, holding that the circuit court erred in excluding deposition testimony that was essential to Noguchi’s defense. Noguchi relied upon the deposition testimony of two National Union employees who stated there was no coverage for grand jury subpoenas.

    On remand, Noguchi moved for summary judgment on the issue of causation, arguing there was no evidence of proximate cause against Noguchi. The circuit court agreed, finding Pflueger had put forth no evidence to establish that Noguchi’s conduct was a contributing or substantial factor in National Union’s decision to deny coverage. Pflueger appealed.

    The ICA held that the causation issue as framed by Noguchi (i.e., whether National Union would have denied coverage even if Noguchi had timely tendered the grand jury subpoena matter) involved a genuine issue of material fact. Whether Noguchi’s actions and inactions were legal causes of Pflueger’s losses in light of National Union’s denial of the claim were issues for the fact finder and could not be decided as a matter of law. The circuit court erred in granting Noguchi’s motion for summary judgment. 

    Judge Hiraoka concurred, but did not agree that what National Union would have done had Noguichi timely tendered the subpoena was material. Instead, Noguhchi had to show that even if Pflueger’s subpoena had been timely tendered, the insurer would not have been obligated to advance defense costs. Therefore, Noguchi did not meet its burden and the circuit court erred by granting summary judgment.

    The Supreme Court agreed with Judge Hiraoka’s analysis. Noguchi attempted to demonstrate that the causation element of Pflueger’s claims were negated by the testimony of the two National Union employees, which purportedly showed that no causal connection existed between Noguchi’s negligence and Pfluger’s injury because the National Union would have denied coverage regardless of the claim’s timeliness.

    Noguchi had to demonstrate that the National Union would not have been obligated to advance Pflueger’s defense costs if the grand jury subpoena matter were timely tendered in order to negate causation. Only then would Noguchi have demosntrated that its role in the untimely tender was not a legal cause of Pflueger’s harm. Instead, Noguchi offered testimony of the two employees, who both suggest that National Union would not have considered the subpoenas to be a covered claim if timely submitted, in an attempt to negate the causation element of Pflueger’s claims. However, the testimony did not negate causation. If the insurer denied coverage after the timely tender of Pflueger’s grand jury subpoena matter, Pflueger could then file a declaratory relief action, with or without a cliam for bad faith. National Union’s disclaimer of coverage was not determinative of Pflueger’s legal rights or legally cognizable harm – only a court’s ruling on the matter was. 

    Therefore, the circuit court’s grant of summary judgment in favor of Noguchi on the grounds that the employees’ testimony negated the causation element was incorrect.