A Hilo judge will decide whether certain defendants will be dismissed from a lawsuit filed by an elderly Leilani Estates couple who allege their insurer is acting in bad faith by not approving the claim they made after losing their home during the eruption of Kilauea volcano earlier this year.
Honolulu attorney Lennes Omuro, representing the defendants, argued Oct. 31 before Hilo Circuit Judge Henry Nakamoto that claims of bad faith brought by Philip and Lanell Haysmer against John Mullen and Co., Arm Claims Inc. and Specialty Group LLC won’t withstand legal scrutiny and should be dismissed. The couple, who were insured through Lloyd’s of London, filed their insurance claim on May 24 after their Luana Street house was destroyed, apparently by a fire caused by the eruption. The couple’s homeowners’ policy covers them for fire but has a lava inundation exclusion. “Certain underwriters” of Lloyd’s were also named as defendants in the suit.
“I am simply not aware of any case … holding a non-insurer defendant liable for breach of implied covenant of good faith and fair dealing,” Omuro told the judge.
“To the contrary, all such bad faith claims have routinely been dismissed against such parties.”
Kona attorney Jeffrey Foster, who represents the Haysmers, said they paid $3,000 a year for their policy and believed they were insured by “multinational insurance company Lloyd’s of London.”
“Mr. and Mrs. Haysmer didn’t realize that they weren’t insured by Lloyd’s of London until it was time for Lloyd’s of London to honor their contract,” Foster argued. “Out of nowhere, an entity called John Mullen appears. Out of nowhere, a California broker appears, Monarch. Out of nowhere, an unlicensed adjusting firm from the state of Arkansas appears, Arm.
“We don’t know who the parties to this contract are. We have a declaration from an insurance broker in the state of California, who is unlicensed in the state of Hawaii, that certain quote-unquote syndicates are the underwriters, are the quote-unquote underwriters of Lloyd’s of London.
“Mr. and Mrs. Haysmer have no home. They have no belongings. They lost everything. And what do they get for their $3,000 a year? Delay. … What Mr. and Mrs. Haysmer didn’t realize is that 10 days after they submitted their claim, John Mullen sent an internal communication to Monarch stating that the cause of the loss was lava and/or lava flow.”
Nakamoto said he would take Omuro’s motion to dismiss under advisement and render written decision at a later date.
More than 700 lower Puna homes were destroyed during the eruption, which started on May 3 and ceased in early August.
After the hearing, Foster said his client has pictures that prove the home was taken by fire and not by inundation by the lava flow.
“The catchment tank is still standing on their property,” Foster said. “It’s a situation where they reported a fire claim and the adjuster assigned to the claim decided to report it as a lava claim to the powers that be. We’re really concerned that from Day One, they were trying to deny the Haysmers’ claim due to the lava exclusion.”
“The problem is, they were covered for fire,” he continued. “We’re going to litigate this issue of the exclusion, but I think it’s really important to point out again that there’s a communication from the adjuster mischaracterizing the claim. The Haysmers submitted a claim for fire. And (adjusters) never came to inspect the property, they never met face to face with the Haysmers. They didn’t do any of that. They’re in Arkansas, and they’re computer-issuing a denial based on a property that they never even visited.”
Foster said similar suits would be filed. A second civil complaint was filed by Foster Oct. 26 in Hilo Circuit Court on behalf of Honua Real Estate Group LLC, Michael Kalinowski, Joann Kalinowski, Neal White Zachary M. Stump, Nicole K. Stallard, Mary Lorenz, as trustee of the Michael R. Chroman Living Trust, Jason Evans and Elizabeth Denn, both as herself and as trustee of the Joan E. Denn Living Trust.
According to the state Department of Commerce and Consumer Affairs website, the members of Honua Real Estate Group are Benjamin Tabios and Wendy Shenk.
The defendants are: Certain Underwriters at Lloyd’s of London; Specialty Program Group, dba Specialty Insurance Solutions LLC; Borisoff Insurance Services Inc., dba Monarch E&S Insurance Services; All Island Insurance Services LLC; Aloha Insurance Services Inc.; Pyramid Insurance Centre Ltd.; Arm Claims Inc., dba Affirmative Risk Management; John Mullen and Co. Inc.; and numerous “Doe” defendants.
Among the allegations in the second lawsuit are that all plaintiffs’ claims were denied by third-party adjusters due to a lava flow exemption, but asserts that the policies of these plaintiffs didn’t contain a lava flow exemption, and concludes that Lloyd’s “unreasonable interpretation of the policy constitutes a bad faith denial of each plaintiff’s claims.”
Email John Burnett at jburnett@hawaiitribune-herald.com.