                           NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JUL 13 2011

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

FAIRMONT SPECIALTY, a division of                No. 09-16904
Crum & Forster Group, FKA Fairmont
Insurance Company, agent of North River          D.C. No. 1:08-cv-00450-JMS-
Insurance Company,                               LEK

              Plaintiff - Appellee,
                                                 MEMORANDUM*
  v.

THE ESTATE OF KARINA HOOHULI,
deceased,

              Defendant - Appellant,

  and

TESSIE KOTRYS,

              Defendant.



FAIRMONT SPECIALTY, a division of                No. 09-16921
Crum & Forster Group, FKA Fairmont
Insurance Company, agent of North River          D.C. No. 1:08-cv-00450-JMS-
Insurance Company,                               LEK

              Plaintiff - Appellee,


        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
  v.

THE ESTATE OF KARINA HOOHULI,
deceased,

               Defendant,

  and

TESSIE KOTRYS,

               Defendant - Appellant.


                     Appeal from the United States District Court
                              for the District of Hawaii
                    J. Michael Seabright, District Judge, Presiding

                        Argued and Submitted June 15, 2011
                                Honolulu, Hawaii

Before: ALARCÓN, WARDLAW, and N.R. SMITH, Circuit Judges.

        Plaintiff-Appellee Fairmont Specialty sought declaratory judgment that it

was not required to provide coverage under its Garage insurance policy for claims

arising from a motor vehicle accident in which Defendant-Appellant Tessie Kotrys

was injured and her passenger, Karina Hoohuli, was killed. The Garage Policy was

issued to South Bay Auto and, as relevant here, covers only those vehicles that

South Bay Auto “owns.” The sole question confronting us is whether South Bay

Auto “owned” the subject vehicle at the time of the accident, even though it had


                                          -2-
already sold the vehicle to Kotrys. The district court concluded that it did not, and

that the defendants therefore were not entitled to coverage. We affirm.

1.    Kotrys owned the subject vehicle at the time of the accident. The word

“owner,” in its “plain, ordinary, and accepted sense in common speech,” includes

someone like Kotrys, who entered into a valid sales agreement, took possession of

the vehicle, and obtained her own no-fault insurance. See Hawaiian Ins. & Guar.

Co. v. Fin. Sec. Ins. Co. (HIG), 807 P.2d 1256, 1260 (Haw. 1991) (citing Pac. Ins.

Co. v. Or. Auto. Ins. Co. (Pacific), 490 P.2d 899 (Haw. 1971)). That South Bay

Auto retained legal title to the vehicle is not dispositive of ownership for insurance

purposes. See id. at 1258-62; Pacific, 490 P.2d at 901-02.

      Moreover, we must enforce “‘the objectively reasonable expectations’ of

parties claiming coverage under insurance contracts, which ‘are construed in

accord with the reasonable expectations of a layperson.’” HIG, 807 P.2d at 1260

(citations omitted). In this case, the fact that Kotrys was required to obtain, and did

obtain, her own no-fault insurance indicates that South Bay Auto did not intend,

and Kotrys could not have reasonably expected, that South Bay Auto would




                                          -3-
provide insurance coverage for the subject vehicle.1 See id.

2.    Defendants’ reliance on the transfer-of-title provision in the motor vehicle

registration statute and on the definition of “owner” under Hawaii no-fault

insurance law is unavailing. See Hawaii Revised Statutes (HRS) §§ 286-52(e),

431:10C-103. The Supreme Court of Hawaii has clearly held that definitions

found in the insurance and registration statutes are not determinative of ownership

in the context of insurance coverage disputes. See HIG, 807 P.2d at 1258-60

(discussing HRS § 286-52(e)); id. at 1261-62 (discussing HRS § 294-2(13), the

predecessor statute to HRS § 431:10C-103); Pacific, 490 P.2d at 901-02

(discussing Revised Laws of Hawaii § 160-10(e), the predecessor statute to HRS §

286-52(e)).

3.    The Estate of Karina Hoohuli further argues that the definition of “owned

by” in the “Personal Injury Protection” (PIP) endorsement to the Garage Policy

supersedes the plain meaning of the word “owner.” This definition, however, does

      1
        Defendants argue the sales agreement was not binding unless, and until,
Kotrys’s financing was approved. However, there was no evidence in the record
that any of the provisions relied upon by defendants would have allowed Kotrys to
escape the contract. Further, the evidence indicates that at the time of the accident:
(1) Kotrys’s financing was approved by her bank; (2) South Bay Auto (the only
party with authority to do so) had not disavowed the agreement; and (3) South Bay
Auto regarded Kotrys as owning the vehicle, even assisting her in procuring
financing when it fell through in the past, rather than demanding the return of the
vehicle.

                                         -4-
not mandate a different result. Pursuant to it, the vehicle could have been “owned

by” South Bay Auto, Kotrys, or both at the relevant time.

      Allowing the PIP’s definition of “owned by” to control would also lead to

absurd results. In the “Liability Coverage” portion, the Garage Policy expressly

excludes “customers” from the definition of an “insured.” Given this language, it

follows that the reasonable expectations of the parties were that the Garage Policy

would not cover customers of South Bay Auto. It would be “absurd” for the

Garage Policy to exclude customers from coverage in one part of the policy

(liability coverage), only to provide a definition in another part (PIP) that would

include that customer’s vehicle among the vehicles covered under the overall

policy, including for purposes of the liability coverage. See HIG, 807 P.2d at 1259

(“absurd and unjust” results should be avoided); Pacific, 490 P.2d at 901 (same).

4.    Finally, the Garage Policy’s exclusion of “customers” from the definition of

an “insured” is not contrary to public policy. Numerous courts have concluded

that clauses identical to the one in this case, which exclude “customers” from

liability coverage, do not violate public policy as long as the statutory requirements




                                         -5-
of compulsory and financial responsibility laws are met.2 Nor does this clause

contravene any statutory requirements, see, e.g., HRS § 431:10C-301(a)(2),

because it provides that if the other insurance is absent or inadequate, then the

Garage Policy will cover up to the minimum required limits. See Harden, 626

N.E.2d at 819 (“[A] policy provision which limits an insurer’s liability for a

particular class of drivers to the statutory minimum is valid.”); accord Goodwin,

880 So. 2d at 987-88; Leader Nat’l Ins. Co., 545 N.W.2d at 455; State Farm Mut.

Auto. Ins. Co., 733 N.Y.S.2d at 200; Okla. Farmers. Union Mut. Ins. Co., 967 P.2d

at 482.

      The Estate of Hoohuli’s reliance on Bowers v. Alamo Rent-A-Car, Inc., 965

P.2d 1274 (Haw. 1998), is misplaced. While it may be impermissible for a rental

car company to shift primary responsibility to the driver’s insurance company in

all cases, the insurer is within its rights to limit who qualifies as an “insured” under

its policy. See id. at 1279 (the owner of an automobile may not meet legal

obligations by “contractually shifting responsibility”); First Ins. Co. of Hawaii,



      2
        See, e.g., Harden v. Monroe Guar. Ins. Co., 626 N.E.2d 814, 819 (Ind. Ct.
App. 1993); Goodwin v. W. Heritage Ins. Co., 880 So. 2d 985, 987-88 (La. Ct.
App. 2004); Leader Nat’l Ins. Co. v. Am. Hardware Ins. Group, 545 N.W.2d 451,
455 (Neb. 1996); State Farm Mut. Auto. Ins. Co. v. John Deere Ins. Co., 733
N.Y.S.2d 198, 200 (App. Div. 2001); Okla. Farmers Union Mut. Ins. Co. v. John
Deere Ins. Co., 967 P.2d 479, 482 (Okla. Civ. App. 1998).

                                          -6-
Inc. v. State, 665 P.2d 648, 655 (Haw. 1983) (“‘[L]iability 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.’” (citations omitted)). Thus, the Garage Policy’s

customer-exclusion clause is valid.

      AFFIRMED.




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