UNITED STATES DISTRICT COURT DISTRICT OF HAWAII
AQUILINA v LLOYD’S
Filed December 21, 2018
1. This is a class action lawsuit brought by Plaintiffs on behalf of themselves and a Class (defined below) of similarly situated consumers with a residential property located in the State of Hawaii, who purchased a Lloyd’s of London surplus lines homeowner’s insurance policy, which contains numerous exclusions, such as an exclusion for the peril of lava and/or lava flow causing direct or indirect physical damage or loss of use of the insured property (the “Lava Exclusion”), from Defendants Pyramid Insurance Centre, Ltd. (“Pyramid”) and Ilikea LLC d/b/a Moa Insurance Services Hawaii (“Moa”), which was underwritten by Defendants Borisoff Insurance Services, Inc. d/b/a Monarch E&S Insurance Services (“Monarch”) and Specialty Program Group, LLC d/b/a SPG Insurance Solutions, LLC (“SPG”) (collectively, with Moa and Pyramid, the “Broker Defendants”)….
2. Despite known risks that were insurable without resorting to surplus lines insurance, Broker Defendants, together with Lloyd’s and Doe Defendants 1- 100 (collectively, “Defendants”), improperly steered Plaintiffs and the Class into purchasing Lloyd’s surplus lines homeowner’s insurance to insure their homes against peril. These Lloyd’s surplus lines insurance policies, which contained numerous exclusions, including a Lava Exclusion, are essentially worthless – amounting to no coverage at all.
3. As set forth below, solely in order to unjustly enrich themselves, Defendants misrepresented, in bad faith, to Plaintiffs and the Class that Lloyd’s surplus lines insurance was the only homeowner’s insurance available to them without performing the due diligence required under Hawaii law to place surplus lines insurance.
4. In furtherance of their undisclosed scheme to drive profits and commissions and lower payouts for claims, Defendants improperly steered Plaintiffs and the Class into Lloyd’s surplus lines homeowner’s insurance policies by: (a) failing to perform various duties and due diligence, including the duties and due diligence required under HRS §431:8-301(a); (b) omitting that non-surplus lines insurance was available; and/or (c) artificially inflating the amount of coverage beyond the coverage limits provided under non-surplus lines insurance, specifically through the government-established Hawaii Property Insurance Association (“HPIA”).
5. Specifically, the Broker Defendants steered Plaintiffs and the Class into surplus lines insurance policies that were provided by Lloyd’s. Defendants knew that they were not allowed to place Plaintiffs and the Class with surplus lines insurance unless the insurance coverage amounts exceeded the coverage available through traditional insurance carriers, including the state’s own HPIA insurance program. Therefore, since as early as 2012 to the present (the “Class Period”), instead of performing their required duties and due diligence and ascertaining whether comparable non-surplus lines insurance existed, the Broker Defendants and Lloyd’s steered Plaintiffs and the Class to Lloyd’s policies, including by artificially inflating the insurance coverage amounts in the policies – such as, the home value or the personal liability coverage – beyond the HPIA coverage limits so that they could place Plaintiffs and the Class with Lloyd’s surplus lines insurance policies.
6. The Broker Defendants received kickbacks from Lloyd’s for steering Plaintiffs and the Class to the Lloyd’s surplus lines policies in the form of increased commissions. The Broker Defendants’ commissions were directly tied to the amount of premium steered to Lloyd’s, thereby incentivizing the Broker Defendants to maximize the amount of surplus lines insurance placed with Lloyd’s. Defendants’ scheme to steer Plaintiffs and the Class into these surplus lines policies enabled Lloyd’s to maximize the volume of surplus lines premium, thereby increasing its revenues and profits by writing insurance that Lloyd’s otherwise would not be able to write if Plaintiffs and the Class were to obtain nonsurplus lines property and casualty insurance. Steering Plaintiffs and the Class into Lloyd’s surplus lines insurance policies, which inevitably contain numerous exclusions, also served to reduce loss ratios and payouts for claims, which, in turn, increased the Broker Defendants commissions and Lloyd’s profits.
7. Defendants’ unlawful scheme came to light in May 2018, when Kilauea Volcano, which has been erupting continuously since 1983, erupted from new fissures, displacing hundreds of residents in the lower Puna District of Hawaii Island….
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