Hawaiian Isle Adventures, Inc. v. North American Capacity Insurance Co.

Hawaiian Isle Adventures, Inc. (HIA) (plaintiff) offered ecological tours that included activities like hiking, snorkeling, boogie boarding, surfing, and lectures on Hawaiian culture. After a customer broke his pelvis during a hike, HIA decided to acquire general-liability insurance to protect itself from liability for future incidents. It obtained such a policy from North American Capacity Insurance Co. (NAC) (defendant). The policy stated that NAC would pay all damages HIA became obligated to pay because of covered bodily injuries or property damage and that NAC would defend HIA in any suits to recover such damages. Conversely, it expressly stated that NAC had no duty to defend or indemnify HIA for bodily injuries or property damage that were not covered, for example because they fell under an exclusion. The policy’s designated-work exclusion stated that the policy did not cover bodily injuries arising from “your work,” which it described as waterfall hiking, snorkeling, boogie boarding, and surfing. An athletic exclusion stated that the policy did not cover any bodily injuries incurred by a person “while practicing for or participating in any sports or athletic contest or exhibition” sponsored by HIA. During the policy period, Lee Townes drowned while snorkeling on an HIA tour. Townes’s wife filed a wrongful-death action against HIA to recover damages. NAC refused to defend HIA in the suit or indemnify it for any damages, arguing that Townes’s death fell under the designated-work and athletic exclusions. HIA sued NAC in federal court, seeking a declaratory judgment that Townes’s death was a covered injury and a holding that NAC had breached the policy contract by refusing coverage. NAC moved for summary judgment.